Surrogate Income

[Snaggletooth]

This is the absolute first such inquiry in my career.

A married couple have problems having children. They have approached my client with the idea of planting an embryo into her womb for full-term delivery. They are negotiating to pay my client appx $45,000. The question:

**Are there any special exemptions or deductions for this? [I can't think of any]
**Would this be self-employment income?

I'm wondering what kind of deduction the married couple may take...$45,000 as Sch A medical subject to the 10% floor?

[Roland Slugg]

Snag, if you will type "Is surrogate birthing income taxable?" into Google, you'll get 818,000 hits in 0.40 second after hitting enter. Well, that's how many I got.

Happy reading.

[Snaggletooth]

But how many...

Yes I will. How many of the responses are from sources that are reliable?

I can ask barbers, waitresses, garbagemen, or engineers as well.

[DaveinTexas]

Here you go

http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1056&context=wmjowl

Start on page 343; happy reading!

Later in the article, "face tattoes" are mentioned, pretty interesting indeed.

Also, I would say no SE income if the income is not derived from an activity that is not "regular and continuous". One time service, no SE income, in my opinion.

I don't know about the deduction for the payer, I would say no because it may be considered a "personal expense".

[ATSMAN]

I agree with Dave in Texas. If this is a one time "activity" then she is not in business and I would classify that as other income not subject to SE by regular Fed and state taxes.

A client of mine was paid a one time fee of $10,000 to take care of a neighbor who lived by herself, in poor health and her daughter who was taking care of her had to leave town for her job!

I treated the income as other income not subject to SE.

It is prudent to disclose it as other income because you don't know if the payer is going to deduct it in some way and I am not doing their tax return!

[spanel]

I agree with Dave in Texas. If this is a one time "activity" then she is not in business and I would classify that as other income not subject to SE by regular Fed and state taxes.

A client of mine was paid a one time fee of $10,000 to take care of a neighbor who lived by herself, in poor health and her daughter who was taking care of her had to leave town for her job!

I treated the income as other income not subject to SE.

It is prudent to disclose it as other income because you don't know if the payer is going to deduct it in some way and I am not doing their tax return!

One time fee of $10,000?!?!? I know this is off topic, but come on. (also sounds like a household employee) How many days for the $10,000? Sign me up!!

Chris

[TAXNJ]

http://scholarship.law.wm.edu/cgi/vi...context=wmjowl

Start on page 343; happy reading!

Later in the article, "face tattoes" are mentioned, pretty interesting indeed.

Also, I would say no SE income if the income is not derived from an activity that is not "regular and continuous". One time service, no SE income, in my opinion.

I don't know about the deduction for the payer, I would say no because it may be considered a "personal expense".

Non deductible -Surrogate expenses- for Adoptipn Credit. TTB 11-4

Nonqualified expenses include expenses:
• To adopt a spouse’s child.
• For surrogate parenting.
• Paid or reimbursed by employer, governmental agency, or other.
• Allowed as a credit or deduction under another tax provision.
• That violate state or federal law.

[ATSMAN]

One time fee of $10,000?!?!? I know this is off topic, but come on. (also sounds like a household employee) How many days for the $10,000? Sign me up!!

Chris

At first I thought that my client was an household employee also but the facts don't bear it out. They were neighbors and friends for over 50 years!

"Household employees include housekeepers, maids, babysitters, gardeners, and others who work in or around your private residence as your employee. Repairmen, plumbers, contractors, and other business people who provide their services as independent contractors, are not your employees. Household workers are your employees if you can control not only the work they do but also how they do it. "

[Snaggletooth]

Thanks

There appear to be enough good reference material out there to enable my position. In short, taxable, but not self-employment income unless there is repetition.

Thanks to all - Snag

[taxea]

This is the absolute first such inquiry in my career.

A married couple have problems having children. They have approached my client with the idea of planting an embryo into her womb for full-term delivery. They are negotiating to pay my client appx $45,000. The question:

**Are there any special exemptions or deductions for this? [I can't think of any]
**Would this be self-employment income?

I'm wondering what kind of deduction the married couple may take...$45,000 as Sch A medical subject to the 10% floor?

I would first get a copy of the written agreement. Who pays the medical costs and any other expenses? What does the payment include? This is 1040 Ln 1 and expenses, if paid by the surrogate on Sch A.

[Burke]

I would first get a copy of the written agreement. Who pays the medical costs and any other expenses? What does the payment include? This is 1040 Ln 1 and expenses, if paid by the surrogate on Sch A.

It should be Line 21.

[Bonnie]

Not tax related but related to original post in that my daughter and son-in-law also had issues having children. A friend volunteered to carry a baby for them. In Kentucky it is illegal to take money for doing this so they could not call her a surrogate (gestational carrier, instead). Other states the carrier can be paid to do this. A long process with many legal issues including being told they may have to adopt their own babies (but in end they didn't have to do this as biological parents were listed on birth certificates.) First implant the embryo died early on. Second try was successful and I now have 7 year old twin grandsons. Also all medical expenses during the pregnancy and delivery were paid by insurance of lady who carried the babies. Expenses for process ahead of time of about 30,000 was paid by my daughter and her husband. Worth every penny

[taxea]

Not tax related but related to original post in that my daughter and son-in-law also had issues having children. A friend volunteered to carry a baby for them. In Kentucky it is illegal to take money for doing this so they could not call her a surrogate (gestational carrier, instead). Other states the carrier can be paid to do this. A long process with many legal issues including being told they may have to adopt their own babies (but in end they didn't have to do this as biological parents were listed on birth certificates.) First implant the embryo died early on. Second try was successful and I now have 7 year old twin grandsons. Also all medical expenses during the pregnancy and delivery were paid by insurance of lady who carried the babies. Expenses for process ahead of time of about 30,000 was paid by my daughter and her husband. Worth every penny

Are you saying that by just changing the description allows the deduction? Seems to me it means the same thing and would still be illegal.

[Bonnie]

No I was not saying that. I was just telling a story from my own family experience because this is such a rare occurance. There was no payment involved in this case because it's illegal to pay someone to do this in Kentucky. Totally different scenero and just posted for human interest. At beginning I said it's not tax related.