Rev. Rul. 79-66

ISSUE

Are amounts paid by a taxpayer for the removal or elimination of lead-based paint from the surfaces of the taxpayer's personal residence deductible as expenses for medical care under section 213 of the Internal Revenue Code of 1954?

FACTS

The taxpayer and immediate family acquired and have been occupying an old frame house as their personal residence. The taxpayer has a dependent child, age 3, living in the house. After several months of occupancy, the child became ill and was diagnosed by a physician as having lead poisoning. The child was immediately put on a program of detoxification. In addition, as a necessary part of the child's treatment, the physician recommended that taxpayer's house be tested by local health officials to determine if the surfaces had a high level of lead.

Upon the taxpayer's request, a city health department employee tested the painted surfaces in the taxpayer's personal residence using a portable x-ray fluorescence analyzer (XRF). The test revealed that the paint on such surfaces contained a high level of lead.

The doctor recommended, and the local health authorities required, that the lead-based paint be removed from any painted surfaces in the house that were readily accessible or reachable by the child (for example, within four feet of the floor) or any painted surfaces that were in poor repair (cracking, chipping, loose, or peeling paint that is likely to fall) by scraping or by covering with plaster, wallboard, or paneling.

The taxpayer paid a contractor to refinish those hazardous surfaces of the residence that were readily accessible or reachable by the child or that were in poor repair. The woodwork and wood surfaces were scraped to remove the lead-based paint and then all woodwork and wood surfaces were repainted with a non-lead paint. The walls were covered with wallboard or plywood paneling and the new wallboard surfaces were painted with non-leaded paint. The taxpayer would not have refinished any of the hazardous surfaces in the residence, but for the recommendation of the physician and the requirement of the local health department.

LAW AND ANALYSIS

Section 262 provides that no deduction shall be allowed for personal, living, or family expenses, except as otherwise expressly provided in the Code.

Section 213(a) establishes an exception to the general rule of section 262. Section 213(a) provides, in part, for a deduction for the amounts paid during the taxable year for medical care of the taxpayer, the taxpayer's spouse, and the taxpayer's dependents (as defined in section 152) that exceed 3 percent of the adjusted gross income.

"Medical care" is defined by section 213(e)(1)(A), in part, as the amount paid for the diagnosis, cure, mitigation, treatment, or prevention of disease. Section 1.213-1(e)(1)(ii) of the Income Tax Regulations further defines medical care, in part, as follows:

* * * Deductions for expenditures for medical care allowable under section 213 will be confined strictly to expenses incurred primarily for the prevention or alleviation of a physical or mental defect or illness. * * * However, an expenditure which is merely beneficial to the general health of an individual, such as an expenditure for a vacation, is not an expenditure for medical care.

Section 263 of the Code generally provides that capital expenditures are not deductible for federal income tax purposes. However, an expenditure that otherwise qualifies as a medical expense under section 213 is deductible, even though a capital expenditure for permanent improvement or betterment of property, to the extent that the expenditure exceeds the increase in the value of the related property. Section 1.213-1(e)(1)(iii) of the regulations.

In Stringham v. Commissioner, 12 T.C. 580 (1949), acq., 1950-2 C.B. 4, aff'd per curiam, 183 F.2d 579 (6th Cir. 1950), the Tax Court discussed the requirements for claiming a deduction for medical expenses stating:

The Congressional intent is sufficiently evident to require the showing of the present existence or the imminent probability of a disease, physical or mental defect, or illness as the initial step in qualifying an expenditure as a medical expense.

The Tax Court, in Daniels v. Commissioner, 41 T.C. 324 (1963), concluded that taxpayers could not deduct as an expense for medical care the cost of a fallout shelter constructed to protect the taxpayers against sickness from fallout radiation since an imminent probability of disease did not exist.

The disease of lead poisoning, its mitigation, its cure, and its prevention have been the subject of national concern. See Hearings on S. 3216 (Lead-Based Paint Poisoning) Before the Subcomm. on Health of the Senate Comm. on Labor and Public Welfare, 91st Cong., 2d Sess. (1970); the Lead-Based Paint Poisoning Prevention Act, 42 U.S.C. section 4801 (1974); and a statement entitled Preventing Lead Poisoning in Young Children, released by the Center for Disease Control, U.S. Department of Health, Education and Welfare, in April 1978. The disease is particularly prevalent in children under the age of six because of the medically recognized fact that some young children habitually eat non-food substances such as lead-based paint chips. There is a particularly acute hazard when the child has, or has had, lead poisoning or undue lead absorption because of the chronic, recurring nature of the disease when the child is reintroduced into the hazardous environment.

The circumstances of (1) a young (under the age of six) child having, or having had, lead poisoning or undue lead absorption, as certified by a medical doctor, and (2) the child currently living in taxpayer's residence that contains a hazardous environment of high level lead-based paint surfaces, as certified by local health authorities, satisfy the present existence or imminent probability of disease standard considered in Stringham and Daniels.

Therefore, the expenses incurred by the taxpayer for the elimination of high level lead-based paint from the surfaces of the taxpayer's residence that were readily accessible or reachable by the child or were in poor repair are expenses incurred primarily for the mitigation or prevention of a physical illness within the meaning of section 213(e)(1)(A) of the Code and section 1.213-1(e)(1)(ii) of the regulations.

HOLDING

Because of the demonstrated existence of the lead poisoning of the taxpayer's child in this case, amounts paid for the scraping of the hazardous woodwork and wood surfaces of the residence that were readily accessible or reachable by the child or in poor repair are deductible as a medical care expense within the limitations of section 213 of the Code. In addition, because the installation of wallboard or paneling over surfaces that were readily accessible or reachable by the child or in poor repair is a permanent improvement, the cost of which is a capital expenditure, the cost of such an improvement is deductible as a medical expense (within the limitations of section 213) only to the extent such cost exceeds the increase in value of the taxpayer's residence attributable to such permanent improvement. Section 1.213-1(e)(1)(iii) of the regulations.

However, the cost of painting the scraped surfaces and the new wallboard surfaces is a nondeductible personal expense under section 262 of the Code. In addition, any portion of the cost of scraping or otherwise refinishing surfaces not readily accessible or reachable by the child or not in poor repair, is a nondeductible personal expense under section 262.