Rev. Rul. 71-282

An individual taxpayer, A, subscribed to a plan that provided for the storage and retrieval of personal medical information by a computer data bank, and for this service he paid an initial fee and an annual fee. Another individual taxpayer, B, had his subscription to the same plan paid by his employer, corporation X, under a group subscription plan covering all of X's employees. The service provided by the computer data bank consisted of storing medical information that was furnished by the personal physician of each enrolled individual, upon the written authorization of the enrollee, regarding the individual's illnesses, diseases, allergies, medication prescribed on a long-term basis, vital sign statistics, blood type, and family medical history, and rapidly retrieving and furnishing such information upon request to any physician attending him. A special identification card was furnished to each individual enrolled in the plan.

Held, since the service provided by the computer data bank facilitates the diagnosis of a physical or mental defect or illness and, thus, serves to prevent or alleviate a defect or illness, amounts paid for that service by A are paid for medical care and are deductible by him as medical expenses, subject to the limitations of section 213 of the Internal Revenue Code of 1954.

Held further, since the service provided by the computer data bank is a medical service, the cost of which is deductible by an individual, the group subscription to the plan purchased by corporation X is an accident or health plan for compensation of its employees for personal injuries or sickness. Therefore, any payments made by X for B's participation in the plan are excludable from B's gross income under the provisions of section 106 of the Code.

Held further, the amount paid by corporation X for the coverage of all its employees is deductible as an ordinary and necessary business expense under section 162 of the Code.