Dr. Gardner for about two years, but discontinued seeing him after that time because he could no longer afford the consultation fees. Petitioner is no longer on medication. Petitioner regularly exercises to avoid "putting myself in positions any longer where I can have this kind of a setback."

Respondent determined an additional tax of $20,880 on the $208,802 premature distribution from petitioner's IRA.

OPINION

The legislative history accompanying the enactment of former section 408(f) explains the purpose of what is now section 72(t), as follows: premature distributions from IRA's frustrate the intention of saving for retirement, and section 72(t) discourages this from happening. S. Rept. 93-383, at 134 (1974), 1974-3 (Supp.) C.B. 80, 213. Thus, in the event of a distribution to an individual from his or her IRA before such individual attains age 592, the individual's tax on the amount distributed is increased by 10 percent of the total distribution. H. Conf. Rept. 93-1280, at 339 (1974), 1974–3 C.B. 415, 500.

Section 72(t)(1) and (2) provides in relevant part:

SEC. 72(t). 10-PERCENT ADDITIONAL TAX ON EARLY DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS.—

(1) IMPOSITION OF ADDITIONAL TAX.-If any taxpayer receives any amount from a qualified retirement plan (as defined in section 4974(c)), the taxpayer's tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income.

(2) SUBSECTION NOT TO APPLY TO CERTAIN DISTRIBUTIONS.-Except as provided in paragraphs (3) and (4), paragraph (1) shall not apply to any of the following distributions:

(A) IN GENERAL.-Distributions which are

*

(iii) attributable to the employee's being disabled within the meaning of subsection (m)(7),

Section 72(m)(7) provides:

(7) MEANING OF DISABLED.-For purposes of this section, an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be consid

ered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary may require.

S. Rept. 93-383, supra at 134, 1974-3 C.B. (Supp.) at 213 states that “Generally it is intended that the proof [of disability] be the same as where the individual applies for disability payments under social security."

The regulations, promulgated pursuant to the statutory authorization contained in section 72(m)(7), provide that an individual will be considered to be disabled if he or she is unable to engage in any "substantial gainful activity" by reason of any medically determinable physical or mental impairment that can be expected to result in death or to be of longcontinued and indefinite duration. Sec. 1.72-17A(f)(1), Income Tax Regs. Significantly, the regulations also provide that an impairment which is remediable does not constitute a disability. Sec. 1.72–17A(f)(4), Income Tax Regs.

Notwithstanding the apparent severity of petitioner's illness in 1989, which, according to Dr. Gardner, persisted into the spring of 1992, the illness did not fall within the definition of "disabled" as contemplated by section 72(t)(1) and (2) and (m)(7), and the regulations thereunder. Petitioner continued to function as an active stock trader in the face of his clinical depression and in fact withdrew his IRA funds to further that activity. Thus, his condition fails to meet the regulatory requirement that the individual be so impaired as to be unable to engage in any substantial gainful activity. Sec. 1.72–17A(f)(4), Income Tax Regs.

Petitioners argue that Robert's activities during 1989 resulted in a net loss of $94,000, which, they say, is not an indication of participating in a "gainful activity". But we have held in another context, which by analogy is relevant here, that a taxpayer may be engaged in a profit-making activity, even without actually making a profit in a given year, if the individual has an actual and honest profit-making objective. See Dreicer v. Commissioner, 78 T.C. 642, 646 (1982), affd. without published opinion 702 F.2d 1205 (D.C. Cir. 1983). We equate a “substantial gainful activity" in this context with an "actual and honest objective of making a profit." Obviously, petitioner did not have failure to make a profit as his objective, even though as it turned out he failed to make a profit from his trading activities in 1989.

Petitioners criticize, as being too restrictive, the regulatory standard of a mental disease impairment that would be considered as preventing gainful activity. The standard is contained in section 1.72–17A(f)(2)(vi), Income Tax Regs., which reads as follows:

(vi) Mental diseases (e.g., psychosis or severe psychoneurosis) requiring continued institutionalization or constant supervision of the individual;

Petitioners argue that Robert was under "constant supervision" for two years and that the alternative regulatory requirement of "continued institutionalization" is outdated because "medical practice in the latter part of the 20th century attempts NOT to institutionalize patients". The fact that Robert was never institutionalized does not, of course, mean that the issue must automatically be decided in favor of the Government, but we do not believe that Robert's psychiatric consultations rise to a level that could properly be categorized as "constant supervision". Petitioners assert that more Americans are affected annually by clinical depression than by heart disease or cancer. We would simply respond by recognizing that many seek professional help with the expectation (or hope) that their depression manifestations can be alleviated, just as persons suffering from other illnesses, many of them quite serious, seek and obtain periodic medical assistance to alleviate their conditions. But periodic professional consultation (such as petitioner's) alone does not, in our judgment, equate with the constant supervision envisioned by the regulation. And petitioners have not suggested that Robert suffered from psychosis or severe psychoneurosis such as would require his continued, constant supervision.

Petitioners also assert that the remediability of petitioner's condition was uncertain in 1989, and that the fact that the condition abated is a tribute to medical science, but was by no means a certainty in 1989. While this may or may not be true, we would again point out that regardless of the potential permanency of his condition, or the absence thereof, petitioner was not so impaired as to be unable to actively pursue the substantial gainful activity of securities trading in which profession he was engaged throughout the year in question. In conclusion, we might also point out that Congress has provided a means of access to IRA's before retirement in some cases of medical problems which, though serious, do not

result in permanent disability. Section 72(t)(2)(B) permits premature IRA distributions without penalty to the extent such distributions do not exceed the amount allowable as a deduction under section 213 for medical care (determined without regard to whether an individual itemizes deductions). Petitioners have not claimed the protection of this section, presumably because they reported only $5,481 in unreimbursed medical and dental expenses on their 1989 Form 1040, which amount was not deductible by petitioners because it did not exceed 7.5 percent of their adjusted gross income, as required by section 213(a).

For the foregoing reasons we hold that petitioners are liable for the 10-percent additional tax on a premature distribution from Robert's qualified plan in 1989, pursuant to section 72(t). See also, to the same effect, Kovacevic v. Commissioner, T.C. Memo. 1992-609, and Kane v. Commissioner, T.C. Memo. 1992–218.

To reflect this holding and concessions,

Decision will be entered under Rule 155.

BOYD GAMING CORPORATION, F.K.A. THE BOYD GROUP AND SUBSIDIARIES, PETITIONERS v. COMMISSIONER

OF INTERNAL REVENUE, RESPONDENT

CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES,
PETITIONERS v. COMMISSIONER OF INTERNAL

REVENUE, RESPONDENT

Docket Nos. 3433-95, 3434-95.

Filed May 22, 1996.

Ps provided "free" meals to their employees in private cafeterias located on their business premises. R determined that sec. 274(n)(1), I.R.C., limits Ps' deduction for the cost of these meals. R moves for partial summary judgment in her favor. Ps object to R's motion, arguing that they may deduct 100 percent of their cost under the de minimis fringe benefit exception of sec. 274(n)(2)(B), I.R.C., and that the applicability of this exception is a factual determination that has yet to be made. Ps also move for partial summary judgment in their favor, arguing that they may deduct 100 percent of the meals' cost under the bona fide sale exception of sec. 274(e)(8), I.R.C. Held, Ps may deduct 100 percent of the meals' cost if they are within the de minimis fringe benefit exception of sec.

274(n)(2)(B), I.R.C., and whether they are within this excep-
tion is an unanswered question of fact. Held, further, Ps'
provision of the meals is not within sec. 274(e)(8), I.R.C.

Thomas P. Marinis, Jr., and J. Barclay Collins III, for petitioners.

Paul L. Dixon, for respondent.

OPINION

LARO, Judge: These consolidated cases are before the Court on cross-motions for partial summary judgment.1 Respondent moves for partial summary judgment in her favor, arguing that section 274(n)(1) limits petitioners' deductions for the cost of "free" food and beverages that they provided to their employees on petitioners' business premises.2 Petitioners object to respondent's motion, arguing that a genuine issue of fact exists as to the applicability of an exception to section 274(n)(1); namely, whether the food and beverages are a de minimis fringe benefit under section 274(n)(2)(B). Petitioners also move for partial summary judgment in their favor, arguing that section 274(n)(1) does not apply because petitioners "sold *** [the food and beverages to their employees] in a bona fide transaction for an adequate [and full] consideration in money or money's worth".3 See sec. 274(e)(8), (n)(2)(A). Respondent replied to petitioners' notice of objection, and she objected to petitioners' cross-motion.4

We hold that petitioners may deduct 100 percent of the cost of the food and beverages provided to their employees, if the food and beverages are within the de minimis fringe benefit exception of section 274(n)(2)(B). Whether petitioners are within this exception is a factual determination that is yet to be made. We also hold that petitioners' provision of the food and beverages is not within section 274(e)(8).

Unless otherwise stated, section references are to the Internal Revenue Code in effect for the years in issue. Rule references are to the Tax Court Rules of Practice and Procedure. We refer to Boyd Gaming Corp., f.k.a. the Boyd Group

1 On Nov. 7, 1995, the Court granted the unopposed motion of respondent to consolidate the two cases for purposes of trial, briefing, and opinion.

2 Respondent supports her motion with only the pleadings.

3 Petitioners' cross-motion is supported by the affidavit of one of their senior vice presidents. 4 Respondent's objection is unaccompanied by supporting affidavits.