Wednesday, December 24, 2008
In Magdalin v. Commissioner, T.C. Memo. 2008-293 (Dec. 23, 2008), the Tax Court denied a sperm donor's claimed medical expense deduction, even though the Service allows (per Priv. Ltr. Rul. 2003-18-017 (Jan. 9, 2003)) the expenses of egg donation as deductible medical expenses:
Petitioner is a medical doctor licensed to practice medicine in Massachusetts. At all relevant times, his sperm count and motility were found to be within normal limits. He has twin sons from a marriage to his former spouse, Deborah Magdalin. The twins were born through natural processes and without the use of in vitro fertilization (IVF). ...
Petitioner ... deducted medical expenses of $34,050 for 2004 and $28,230 for 2005 [related to the costs he incurred in having his sperm combined with the eggs of anonymous donors with the rsulting two embryos impanted in two unrelated women who carried the babies to term for Petitioner]. ...
Petitioner argues that it was his civil right to reproduce, that he should have the freedom to choose the method of reproduction, and that it is sex discrimination to allow women but not men to choose how they will reproduce. [Petitioner] refers to Priv. Ltr. Rul. 2003-18-017 (Jan. 9, 2003) to show that "the expenses for egg donor, medical and legal costs are deductible medical expenses."
"Although respondent believes that amounts paid for procedures to mitigate infertility may qualify as deductible medical care," respondent argues that "Petitioner had no physical or mental defect or illness which prohibited him from procreating naturally", as he in fact has, and that "the procedures were not medically indicated." Respondent's position is that the expenses at issue are nondeductible under § 262 because "Petitioner's choice to undertake these procedures was an entirely personal/nonmedical decision."
The expenses at issue were not paid for medical care under the first portion of § 213(d)(1)(A) because the requisite causal relationship is absent. None of the expenses at issue was "incurred primarily for the prevention or alleviation of a physical or mental defect or illness." [Reg. §] 1.213-1(e)(1)(ii). In other words, petitioner had no medical condition or defect, such as, for example, infertility, that required treatment or mitigation through IVF procedures. We therefore need not answer lurking questions as to whether (and, if so, to what extent) expenditures for IVF procedures and associated costs (e.g., a taxpayer's legal fees and fees paid to, or on behalf of, a surrogate or gestational carrier) would be deductible in the presence of an underlying medical condition. We leave such questions for another day. Further, petitioner cannot deduct those expenses under the second portion of the statute because they did not affect a structure or function of his body.
[Fn.: In the PLR petitioner refers to, the IRS concluded that egg donor fees and expenses, including legal fees for preparing a contract between the taxpayer and the egg donor, were deductible medical expenses for purposes of § 213. Although petitioner raises that PLR in his brief, there are important differences between his situation and that of the taxpayer requesting the PLR. The requesting taxpayer had "unsuccessfully undergone repeated assisted reproductive technology procedures to enable * * * [her] to conceive a child using * * * [her] own eggs." Priv. Ltr. Rul. 2003-18-017 (Jan. 9, 2003). And, the procedures were going to be performed "in order to enable * * * [her] to obtain a donated egg for implantation into * * * [her] body." In addition, although IRS publications are not authoritative sources of Federal tax law, we note that IRS Publication 502, Medical and Dental Expenses (2008), provides that procedures such as in vitro fertilization are deductible under § 213 if such expenses are incurred "to overcome an inability to have children."]
Although petitioner at times attempts to frame the deductibility of the relevant expenses as an issue of constitutional dimensions, under the facts and circumstances of his case, it does not rise to that level. Petitioner's gender, marital status, and sexual orientation do not bear on whether he can deduct the expenses at issue. He cannot deduct those expenses because he has no medical condition or defect to which those expenses relate and because they did not affect a structure or function of his body. Expenses incurred in the absence of the requisite underlying medical condition or defect and that do not affect a structure or function of the taxpayer's body are nondeductible personal expenses within the meaning of § 262.