Taxpayer, married couple, want to have a baby. Wife can't conceive. Husband will donate sperm. They will basically pay for 2 services: 1. An egg donor; and 2. A surrogate mother, in whom the egg and the sperm will be implanted.
The prospective parents want to know if any of the expenses are deductible. There are medical expenses of the husband to donate sperm. (OK there.) Then there are medical expenses, legal fees for contracts, insurance fees, etc. and a fee payable to the egg donor, for the eggs. Similarly there are fees to cover the medical expenses of the surrogate mother and a fee for her services. This is expensive.
I have begun to do the research. There is a PLR (200318017) that says that egg donor fees and expenses related to obtaining a willing egg donor are allowable as medical expenses. In that case the egg was to be implanted in the taxpayer (mom) who was paying for the egg. IRS stated that "Because the costs (of egg donation) are preparatory to the performance of your own medical procedure (pregnancy), the expenses are medical care for the purpose of section 213."
In my case, the wife can't use the egg, so they are hiring a surrogate.
Except for the collection of sperm, some psychological testing etc, the taxpayers will not undergo medical procedures (as in the above PRL), like pregnancy. So at this point I don't think I have a hook to hang my hat on.
In the alternative, could the adoption credit come into play here? Answering my own question, probably not, since the husband is the biological father, only the wife will have to go through adoption.
Anyone run across this before? I have spoke with the author of the PRL quoted above, and he doesn't seem to think there will be deductible medical for these taxpayers, unless the surrogate qualified as a dependent of my clients.
The prospective parents want to know if any of the expenses are deductible. There are medical expenses of the husband to donate sperm. (OK there.) Then there are medical expenses, legal fees for contracts, insurance fees, etc. and a fee payable to the egg donor, for the eggs. Similarly there are fees to cover the medical expenses of the surrogate mother and a fee for her services. This is expensive.
I have begun to do the research. There is a PLR (200318017) that says that egg donor fees and expenses related to obtaining a willing egg donor are allowable as medical expenses. In that case the egg was to be implanted in the taxpayer (mom) who was paying for the egg. IRS stated that "Because the costs (of egg donation) are preparatory to the performance of your own medical procedure (pregnancy), the expenses are medical care for the purpose of section 213."
In my case, the wife can't use the egg, so they are hiring a surrogate.
Except for the collection of sperm, some psychological testing etc, the taxpayers will not undergo medical procedures (as in the above PRL), like pregnancy. So at this point I don't think I have a hook to hang my hat on.
In the alternative, could the adoption credit come into play here? Answering my own question, probably not, since the husband is the biological father, only the wife will have to go through adoption.
Anyone run across this before? I have spoke with the author of the PRL quoted above, and he doesn't seem to think there will be deductible medical for these taxpayers, unless the surrogate qualified as a dependent of my clients.
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