I have a physician client whose MDPA (S-Corp) is the partner in the partnership for whom he is an employee.
The partnership issues him a W-2 showing the health insurance premiums they paid on his behalf in addition to his not-insignificant wages. Partnership also issues his MDPA a K-1 reporting the insurance benefits as guaranteed payments.
He does not take wages from his S-Corp, only distributions which roughly mirror net income.
My firm's position in prior years was to consider his employer-subsidized health insurance to be SE insurance premiums because he included it in S-Corp income. This is my first year with this firm, and I disagree with this position. My reasoning is as follows:
(A) he was not an employee of the S-Corp, and
(b) the premiums were paid as a subsidized plan of his employer.
Sure, he included his cost in income, but the way he structured his ownership interest to avoid SE tax on his entire partnership income and his S-corp income outside the partnership, he's made himself ineligible for this deduction.
Thoughts?