One of our favorite tax strategies is to have a farmer employee his wife and then set up a medical reimbursement plan that covers the employee (e.g. wife) and her family (e.g. husband and kids).
Earlier this year, the IRS disallowed the deduction for a farm couple and when they went to court the tax court agreed with the IRS. Now we have some good news. The farmer appealed the decision and the appeals court said that the IRS was wrong.
The taxpayer won but I am sure that he paid a hefty price in legal and accounting fees to prove his point. The lesson to be learned is to make sure that you have your paperwork up to date. You never know when the IRS is going to come calling.
