                        T.C. Memo. 2011-52



                     UNITED STATES TAX COURT



              JOSEPH KUNTZ III AND SYRITA E. KUNTZ,
           AN INCAPACITATED PERSON, JOSEPH KUNTZ III,
            GUARDIAN AND CONSERVATOR, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7691-09.              Filed March 1, 2011.



     Joseph Kuntz III, for petitioners.

     John D. Davis, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     MORRISON, Judge:   The Commissioner of Internal Revenue (the

IRS) issued a notice of deficiency disallowing business-expense

deductions the Kuntzes claimed in 2006 and 2007 for amounts they

paid to a caregiver for Mrs. Kuntz.   The Kuntzes filed a petition

for redetermination with the Court.   The issue for decision is
                                   - 2 -

whether the Kuntzes are entitled to business-expense deductions

for 2006 and 2007 for payments to the caregiver.

                             FINDINGS OF FACT

       Some facts have been stipulated.     Those stipulated facts are

adopted by the Court.       At the time they filed their petition, the

Kuntzes resided in Idaho.       Mr. Kuntz is self-employed as a tile

and marble contractor.       He operates his business out of the

Kuntzes’ personal residence.       Mrs. Kuntz has Alzheimer’s disease,

and her condition requires someone to be with her at all times.

Mr. Kuntz employs a caregiver to look after Mrs. Kuntz during the

day.       The caregiver also does clerical work for Mr. Kuntz’s

business.       Mr. Kuntz paid $20,184 to the caregiver in 2006.   He

paid $20,265 to the caregiver in 2007.

       On their tax returns for 2006 and 2007, the Kuntzes deducted

the payments to the caregiver as expenses of Mr. Kuntz’s tile and

marble business.       The IRS issued a notice of deficiency

disallowing the deductions.1      Since then, the IRS has stipulated

that $2,115 of the $20,184 paid to the caregiver in 2006, and

$2,115 of the $20,265 paid to the caregiver in 2007, are

deductible as business expenses because the caregiver performed


       1
      The notice of deficiency included some other adjustments.
The Kuntzes have conceded that these other adjustments are
correct. As a result of all the adjustments in the notice of
deficiency, including the disallowance of the deductions for the
caregiver payments and the other adjustments that the Kuntzes now
concede are correct, the deficiencies in tax determined in the
notice of deficiency were $3,182 for 2006 and $5,153 for 2007.
                                 -3-

some clerical services for Mr. Kuntz’s business.     The IRS has

also stipulated that if the Kuntzes are not allowed business-

expense deductions for the remaining amounts paid to the

caregiver, they are entitled to corresponding medical-expense

deductions on Schedule A, Itemized Deductions, of $13,490 for

2006 and $12,143 for 2007.

                               OPINION

     The ordinary and necessary expenses of carrying on a trade

or business are deductible.    Sec. 162(a).2   However, personal and

family expenses are not generally deductible.     Sec. 262(a).   The

IRS argues that the cost of paying the caregiver is not

deductible under section 162(a) because it was not incurred

primarily to benefit Mr. Kuntz’s business and because it bears

only a remote or incidental relationship to the business.      The

Kuntzes argue that Mr. Kuntz had to employ someone to look after

Mrs. Kuntz while he was at work.    The Kuntzes must prove they are

entitled to the deduction.    Tax Court Rule of Practice and

Procedure 142(a).3

     In Smith v. Commissioner, 40 B.T.A. 1038, 1039-1040 (1939),

affd. 113 F.2d 114 (2d Cir. 1940), the Board of Tax Appeals held



     2
      All section references are to the Internal Revenue Code of
1986, as amended, as in effect for the years at issue.
     3
      Although sec. 7491(a) imposes the burden of proof on the
IRS if certain conditions are met, the Kuntzes concede that they
bear the burden of proof.
                                  -4-

that a married couple could not deduct the cost of paying nannies

to look after their child, even though the nannies’ services

allowed the wife to work outside the home.      Similarly, the

expense of the caregiver for Mrs. Kuntz is not deductible even

though this expense allowed Mr. Kuntz to work outside the home.4

Therefore, the Kuntzes are entitled to business-expense

deductions for payments to the caregiver of only $2,115 for 2006

and $2,115 for 2007.     In accordance with the stipulation, they

are entitled to medical-expense deductions of $13,490 for 2006

and $12,143 for 2007.5

     To reflect the foregoing,


                                             Decision will be entered

                                        under Rule 155.




     4
      It is not necessary for us to determine whether Mr. Kuntz
would have hired the caregiver had he had not been working. The
personal nature of the nanny expenses in Smith v. Commissioner,
40 B.T.A. 1038 (1939), affd. 113 F.2d 114 (2d Cir. 1940), did not
depend upon whether the nannies would have been hired had the
wife not worked.
     5
      The Kuntzes have not claimed a credit under sec. 21, which
allows a taxpayer a credit for a percentage of the expenses of
caring for a spouse who is “physically or mentally incapable of
caring for himself or herself and who has the same principal
place of abode as the taxpayer” if “such expenses are incurred to
enable the taxpayer to be gainfully employed”.
