MU Accounting Tax Deductions Memorandum
Description
Kaylie and Adolpho, husband and wife, resided in NY. In 2019 Kaylie began suffering from pain and numbness in her spinal cord which was the result of an injury to her vertebra. Her physician recommended physical therapy for the strengthening of her back by means of daily periods of swimming. By 2021 her condition continued to deteriorate and she required a cane for support when walking. She suffered excruciating pain in a sitting position. Her physician recommended that she install a swimming pool at her home and use it twice daily for the rest of her life in order to prevent the permanent disability of paralysis.
In 2021 she decided to construct a swimming pool addition to her residence. The house was principally of cut stone construction with minor amounts of brick and stucco, consisted of 6,318 square feet of living space and had a fair market value in 2022 of $875,000.
She hired a contractor to construct the addition at a cost of $176,964. Architectural and engineering fees in the amount of $17,696 were also incurred. Included in the pool addition were certain items not essential to the operation of the pool; namely, a chimney and cooking grill, a sauna bath, a kitchen counter and appliances, a diving board, dressing room cabinets, sheet metal duct work, one bathroom and dressing room, ceramic tile surrounding the pool, and an open terrace and her famous neighborhood favorite ®bsp;a Tiki Bar. The total cost of these items was $22,500.
The materials and workmanship of the structure complement the materials and workmanship of petitioner’s original residence. A large portion of the cost of the swimming pool addition was attributable to the need of having the addition architecturally and aesthetically compatible with petitioner’s residence. They deducted the entire amount on their 2021 return. The return is now under audit and your senior partner has asked you if the pool is deductible.
Discuss all issues and raise any question that you think warrant additional questioning. Find at least three sources to support your conclusions.
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