In Chief Counsel Advice (CCA) 200524001, the IRS concluded that a sole proprietor purchasing health insurance in his or her own name can treat the insurance as if purchased in the name of the business. Assuming that the proprietor meets the requirements of IRC Sec. 162(l) , he or she can claim an above-the-line deduction for the insurance premiums.
But in an article dated 5/15/06 and appearing at http://www.irs.gov/businesses/small/article/0,,id=157049,00.html , the IRS notes that the results change if a sole S corporation shareholder/employee purchases the health insurance in his or her own name. In that case, the S corporation has not established a plan to provide medical care coverage, the shareholder is not treated as self-employed, and the shareholder is not eligible for the Section 162(l) above-the-line deduction. Instead, the shareholder can deduct the health insurance premium as an itemized deduction subject to the 7.5% of AGI limitation.