Yes, I think so.

Obviously, you and your clients want to understand the difference between “reasonable position” and “substantial authority,” carefully look at the facts and circumstances of each individual taxpayer’s practice, etc., to safely apply the Final 199A regs.

Also, not a physician and not a cosmetic surgery patient but my sense is a continuum exists… E.g., someone who does a particular procedure sometimes for pure aesthetic reasons and sometimes for reconstructive reasons? I would think that problematic. Even if on the cosmetic work, no Section 213(d) deduction allowed… On the other hand, someone else who only does something cosmetic-y and something that in some localities doesn’t require a physician? That would seem quite robust.

Thank you

Thanks for the reply.

Some of my MD clients only do plastic surgery (elective surgery only) – we originally filed them as S corps as SSTB entities., Because they were classified as SSTB and their income was in excess of the threshold, they did not receive the Section 199 deduction on their 2019 returns.

Do I have a reasonable position to amend the business and personal returns to claim the income is not SSTB?

That’s interesting… obviously the dialysis is a Section 213(d) “medical services” thing… so then the question is how close the physician is to the dialysis. I would think she or he probably is an SSTB either as a physician providing a medical service or supporting the provision of a medical service or maybe as a consultant providing planning and advice. (The consultant SSTB category is often construed too widely such as people working in software and technology… but in your example situation, I would think it might pretty easily apply…)

Tip: In this case, it’d be interesting to read that Notice I referenced and try to channel the IRS’s logic there, applying it to your situation. In that notice, for example, the physicians doing medical research are NOT section 213(d) “medical services” workers…

I think you can make that argument, yes. What you’re doing is saying, basically, “I’m using the same “medical services” definition as Section 448 (as documented in the TAM) and as Section 4960 (as documented in the notice)…”

You’d want to think about Section 6694 and its regulations, in particular https://www.law.cornell.edu/cfr/text/26/1.6694-2, and whether you conclude this is a “reasonable position” or one for which you think there’s “substantial authority.”

Also, if someone does 50% of her or his practice for Sec 213(d) stuff and 50% for “non-Sec 213(d)” you’re going to have the “Section 213(d)” stuff “taint” the entire trade or business as an SSTB unless you can break the operation into two separate or at least separable trades or businesses.

I think that probably works. See the Notice I linked to though… and maybe that TAM too… and verify that there aren’t medical services. (But it sounds like a claims adjuster or claims processor to me.)