Estate of Baral v. Commissioner

• Decision Date: 05 July 2011
• Docket Number: Docket No. 3618-10.
• Citation: 137 T.C. 1
• Parties: ESTATE OF LILLIAN BARAL, DECEASED, DAVID H. BARAL, ADMINISTRATOR, Petitioner,<BR>v.<BR>COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

137 T.C. 1

ESTATE OF LILLIAN BARAL, DECEASED, DAVID H. BARAL, ADMINISTRATOR, Petitioner,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

Docket No. 3618-10.

07-05-2011

[137 T.C. 2]

David H. Baral, for petitioner.

Scott A. Hovey, for respondent.

OPINION

DAWSON, Judge:

Respondent determined that decedent was liable for a $17,681 deficiency in Federal income tax and additions to tax of $3,107.47 under section 6651(a)(1), $1,173.93 under section 6651(a)(2), and $608.96 under section 6654(a) for 2007.^[1] The issue remaining for decision is whether decedent may deduct as medical care expenses under section 213(a) the following amounts paid during 2007:^[2] (1) $760 paid to decedent's physicians and the New York University Hospital Center; (2) $5,566 paid to decedent's caregivers for supplies; and (3) $49,580 paid to decedent's caregivers for their services. The payments for the caregivers' services are deductible if the services constitute qualified long-term care services as defined in section 7702B(c).

Background

Some of the facts have been stipulated and are so found. The stipulation of facts and supplemental stipulation of facts and the exhibits attached thereto are incorporated herein by this reference.^[3]

Decedent, Lillian Baral, was a resident of Queens, New York, when she died on August 28, 2008, at the age of 92.

[137 T.C. 3]

Her brother, David H. Baral, is the administrator of her estate. He resided in the District of Columbia when the petition was filed in this case. Mr. Baral handled all of decedent's personal and financial affairs under a power of attorney during the last years of her life. He wrote checks from her bank account to pay her bills.

Martin Finkelstein, M.D., was decedent's primary care physician from 2002 until her death. He diagnosed her as suffering from dementia and prescribed Aricept and Namenda, drugs usually prescribed for patients diagnosed with Alzheimer's disease or dementia. Decedent's hospital records indicate that the dementia had been diagnosed as early as 2004. In April 2004 decedent was hospitalized. Decedent's medical records show that when she was hospitalized she had not been compliant with taking her prescription medicines. Following another hospitalization in November 2004 she was evaluated so as to determine whether she was taking her medications properly and whether it was safe for her to live alone and so as to formulate a long-term plan of care.

A medical summary in Dr. Finkelstein's records dated May 1, 2007, shows that decedent had been evaluated on December 26, 2006.^[4] The medical summary indicates that as of that December 26, 2006, (1) decedent's ability to communicate orally was impaired, (2) she was confused, (3) she required assistance with activities of daily living, (4) she required supervision due to her memory deficit, (5) she was at risk of falling and, therefore, could not be left alone, and (6) she required baseline homecare services.

Dr. Finklestein determined that, because of decedent's diminished capacity, she required assistance and supervision 24 hours a day for medical reasons and for her safety. Mr. Baral engaged a company recommended by Dr. Finkelstein to provide the required assistance to decedent. Margurita Pzevorski was one of the individuals sent by the company to provide decedent with the necessary care.

To reduce the cost of care, Mr. Baral terminated the company after a couple months (before the end of 2006) and hired Ms. Pzevorski directly to provide the necessary 24-hour-a-day

[137 T.C. 4]

care. Ms. Pzevorski assisted decedent with bathing, dressing, trips to the doctor, taking her medications, and transferring to a wheelchair. Ms. Pzevorski took 5 weeks off during 2007. Another caregiver, Walters Emily Jakubowski, provided the 24-hour-a-day care for decedent during those weeks.

Ms. Pzevorski and Ms. Jakubowski also paid some of decedent's miscellaneous expenses and submitted receipts to Mr. Baral for reimbursement. Mr. Baral paid Ms. Pzevorski and Ms. Jakubowski for their services and reimbursed them for the supplies with separate checks drawn on decedent's bank account. During 2007 Mr. Baral paid Ms. Pzevorski and Ms. Jakubowski $40,760 and $8,820, respectively, for their services, and he reimbursed them $4,716 and $850, respectively, for decedent's expenses. In 2007, he also paid from decedent's account a total of $760 to Dr. Finkelstein and decedent's other physicians and to the New York University Hospital Center for her medical care. Decedent was not reimbursed by insurance or otherwise for the payments to the caregivers, the physicians, or the New York University Hospital Center.

Mr. Baral spoke on the telephone to decedent and her caregiver every day. Although decedent knew who Mr. Baral was and could communicate with him, the conversations were limited, and it was obvious to Mr. Baral that she had "lost her memory". Decedent's caregivers kept Mr. Baral informed of decedent's activities and condition. Decedent's caregivers were unrelated to her or Mr. Baral.

Decedent received the following income in 2007: (1) $245 interest income, (2) $29,331 ordinary dividends, (3) $13,239 capital gain, (4) $21,246 Social Security income, (5) $7,232 taxable distribution from an IRA, and (6) $33,355 distribution from a pension fund.

Decedent did not file a Federal income tax return for 2007 or pay Federal income tax for 2007. Nor did Mr. Baral, as decedent's attorney-in-fact, file a return on her behalf. Consequently, respondent filed a substitute for return for decedent pursuant to section 6020(b) on the basis of information provided by third parties. On November 9, 2009, respondent sent...