Another Weird Question

[Laura_in_MN]

This is a new one for me. Maybe not for someone else here??

My client just brought me a 1099-Misc issued to her from a fertility clinic showing $4000 in Other Income. She told me that the money was for her eggs which the clinic harvested from her and were in turn "donated" to an infertile couple. She told me that the money was actually a gift from the couple and was passed on to her through the clinic. She said she was told that she would not have to pay income tax on this money.

I don't know where to go with this one. I'm thinking hobby income?, deducting cost of goods sold? what would be the cost of an egg?? Help! .....anyone?

[GeneInAlabama]

What is her basis in the egg?

[Julie]

New one for me too...I'm thinking...Is the money actually a reimbursement for her medical expenses? Those would be considerable for such a donation.

A 1099-Misc generally means that the issuer thinks this is taxable income, so why didn't they tell her that? Or did she misunderstand? At any rate, ask her about her medical expenses.

This is a new one for me. Maybe not for someone else here??

My client just brought me a 1099-Misc issued to her from a fertility clinic showing $4000 in Other Income. She told me that the money was for her eggs which the clinic harvested from her and were in turn "donated" to an infertile couple. She told me that the money was actually a gift from the couple and was passed on to her through the clinic. She said she was told that she would not have to pay income tax on this money.

I don't know where to go with this one. I'm thinking hobby income?, deducting cost of goods sold? what would be the cost of an egg?? Help! .....anyone?

[JohnH]

My first thought would be Line 21 - not subject to S/E tax since she is not in the business of donating eggs. And no reduction of the amount for basis or expenses. Of course, I'm assuming she didn't incur any significant expenses in the process and she doesn't do this on a regular basis.

[Julie]

I would expect her expenses to include the cost of major surgery.

My first thought would be Line 21 - not subject to S/E tax since she is not in the business of donating eggs. And no reduction of the amount for basis or expenses. Of course, I'm assuming she didn't incur any significant expenses in the process and she doesn't do this on a regular basis.

[kcjenkins]

From the little I know about this sort of thing, the person who provides the eggs pays nothing, and may in fact get paid, as she did, for doing this. The people getting the eggs pay for all the costs of collecting the eggs.

I think this clearly IS income, and I would put it on Line 21, since she is not 'in the business' of donating eggs. Remember, ALL income which is not specifically excluded in the code is taxable. And that does not meet any of the exclusions, IMHO.

[Laura_in_MN]

I just got off the phone with my client. She paid nothing out of pocket for the surgery. She does have mileage for several trips (600 miles/RT) to the city where she eventually had the surgery. The mileage would be at business rate, not medical, correct? She has motel stays and standard meal allowance?

[jainen]

>>this clearly IS income<<

There are court cases about blood donations and I think bone marrow. As I recall, it's taxable, non-business, no basis but incidental costs allowed. I wonder why Senator Dole, former Red Cross president, hasn't got it excluded. I guess the RC position is that donors shouldn't be paid--too much risk of attracting HIV patients. You know, she's up for re-election this year and her opponent is the country's first openly-gay candidate; I can't guess what his position on HIV is.

[JohnH]

Sen Dole was elected in 2002 - will be up for re-election 2 years from now, although I'm sure the campaign will begin later this year.

[jainen]

>>elected in 2002 - will be up for re-election 2 years from now<<

A senate term is six years. Dole hasn't started her campaign yet because she doesn't have to worry about her party's primary, while Jim Neal still needs to get nominated. Really nothing to do with the topic; I've just been rambling all day.

I don't think you can deduct mileage at the business rate, because that has an element of deemed depreciation. I don't know about meal allowance; documented is better. Only 50% in any case. Motels, okay if the PRIMARY purpose of the "several trips" was the surgery. All this is subject to 2% AGI limitation, of course.

If we ever get around to overhauling the tax system, I predict for-profit non-business income is going to be a controversial issue.

[JohnH]

You're right. My math skills are way out of sync tonight, and what's worse is,I'm from NC. At least your rambling is accurate.

[kcjenkins]

And if you were claiming the 'business expense' deduction, you would be violating your own contention that this was not SE taxable 'business income'. Medical milage yes, business milage, no.

[BulldogTom]

>>this clearly IS income<<

There are court cases about blood donations and I think bone marrow. As I recall, it's taxable, non-business, no basis but incidental costs allowed. I wonder why Senator Dole, former Red Cross president, hasn't got it excluded. I guess the RC position is that donors shouldn't be paid--too much risk of attracting HIV patients. You know, she's up for re-election this year and her opponent is the country's first openly-gay candidate; I can't guess what his position on HIV is.

E. Dole was Sec of Transportation when I was in the CG. I was very proud to serve in her dept. What a great woman, to bad she did not become the party nominee in 2000. I was pulling for her, but of course, California primaries have never had an impact on the presidential nomination. Hopefully moving to super tues will get us some influence, but looking at the candidates schedules, I don't think so.

Tom

Lodi, Ca