Chronic Illness Costs and Insurance

• § 18.01 Overview of Tax Treatment of Chronic Illness Costs and Insurance
• —–[1] Long-Term Care Expenses
• —–[2] Long-Term Care Insurance Premiums
• —–[3] Long-Term Care Insurance Benefits
• —–[4] Life Insurance Used for Costs of Chronic or Terminal Illness
• —–[5] Limitation on Nontaxable Payments for Chronic Illness
• —–[6] Retirement Community Medical Deductions

• § 18.02 Long-Term Care Expenses and Insurance
• —–[1] Deduction for Long-Term Care Services
• ———-[a] Long-Term Care Services Defined
• —————[i] Differences Between Long Term Care Services and Other Medical Deductions
• —————[ii] The “Services” Limitation
• —————[iii] Maintenance or Personal Care Services
• ———————[A] Maintenance or Personal Care Services Broadly Defined
• ———————[B] Medical and Non-Medical Supplies
• ———————[C] Meals in the Home
• —————[iv] Meals and Lodging for In-Home Caregivers
• ———-[b] Chronically Ill Individuals
• ———-[c] Long-Term Care Provided by Related Parties
• ———-[d] Care in Assisted Living, Dementia, or Skilled Nursing Facilities
• —————[i] Assisted Living, Dementia, and Skilled Nursing Facilities Defined
• —————[ii] Deduction of Fees as Medical Expenses
• —————[iii] Classification of Fees as Cost of Long-Term Care Services
• —–[2] Qualified Long-Term Care Insurance
• ———-[a] Requirements of QLC Contracts
• ———-[b] Deduction for Insurance Premiums
• —————[i] Annual Dollar Limitation on Deduction
• —————[ii] Premiums Paid by a Self-Employed Individual
• —————[iii] QLC Insurance Provided Under Employer Plans
• ———-[c] Taxation of Insurance Benefits
• ———-[d] QLC Insurance as Part of Life Insurance or Annuity Contracts
• ———-[e] Tax-Free Exchanges Involving QLC Insurance Contracts
• —–[3] Life Insurance Used for Costs of Illness
• ———-[a] Taxation of Life Insurance Proceeds in General
• ———-[b] Life Insurance Payments Received for a Terminal Illness
• ———-[c] Life Insurance Payments Received for a Chronic Illness
• ———-[d] Business-Related Life Insurance Payments
• —–[4] Limitation on Nontaxable Payments for Chronic Illness
• ———-[a] Applicability and Overall Computation of the Limitation
• ———-[b] Computation Periods and Methods
• —————[i] Choice Between Equal Payment Rate Method and Contract Period Method
• —————[ii] The Equal Payment Rate Method
• —————[iii] The Contract Period Method
• ———-[c] Sensitivity of the Designated Methods
• ———-[d] Comparison of the Two Computational Methods
• ———-[e] The Service’s Designation of Methods
• ———-[f] Multiple Recipients of Periodic Payments
• —–[5] Comparison with Nonqualified Insurance
• —–[6] Reconciliation of A&H and QLC Provisions

• § 18.03 Continuing Care Retirement Communities
• —–[1] Types of Continuing Care Retirement Communities
• —–[2] Independent Living Units (ILUs)
• —–[3] Guidance Provided by Baker v. Commissioner
• ———-[a] The Facts of the Baker Case
• ———-[b] The Threshold Issue
• ———-[c] Application of the Percentage Method
• ———-[d] The Elements of the Computation
• —————[i] Total Adjusted Expenses
• —————[ii] Adjusted Medical Expenses
• —————[iii] Depreciation of Facilities, Equipment, Etc.
• —————[iv] Interest Expense, Debt Service, and Debt Issue Cost
• —————[v] Medicare, HMO, and Other Billings for Noncontract Patients
• —————[vi] Expense Allocations to Medical Facilities and Medical Operations
• —————[vii] Use of the Medical Percentage to Compute the Medical Deduction
• —–[4] Some Problems with the Baker Case
• ———-[a] Inclusion of Expenses Offset by Other Revenue Sources
• ———-[b] Discount Available Upon Transfer to the ALF, SNF, or ADF
• ———-[c] Use of Multiple Year Experience of a Comparable CCRC
• —–[5] Tax Planning for CCRCs and Residents

» Chapter 19 – ELDERLY AND DISABLED TAX RELIEF