Would a one time donation of a person's egg cells, which was reported on Line 7 of 1099-misc, be reported as "other income" on form 1040 or on Schedule C and Sch SE? Clearly this is not her trade or business.
asked 28 Mar '10, 01:02
I love this question! I am including two selections from my Checkpoint research. Income to the donor is taxable. Income would not be capital gain. The fee is probably for the time spent following proper procedures to ensure successful egg retrieval (see below). One-time donation would not be subject to self-employment income in my opinion. The costs incurred may be deductible medical expenses for the donee.
Egg donor fees and expenses related to obtaining a willing donor, paid by a taxpayer who couldn't conceive using her own eggs, were treated as preparatory to the performance of the taxpayer's own medical procedure (the implantation of a donated egg) which qualified as medical care, and thus were deductible medical expenses of the taxpayer in the year paid. The specific deductible expenses were: (i) the donor's fee for her time and expense in following proper procedures to ensure successful egg retrieval; (ii) the agency's fee for procuring the donor and coordinating the transaction; (iii) expenses for medical and psychological testing of the donor before the procedure, and for insurance for post-procedure medical or psychological assistance for the donor; and (iv) legal fees for preparing a contract between the taxpayer and the egg donor. 7.2
IRS Letter Ruling 200318017 .
On the other hand, egg donor fees, in vitro fertilization (IVF) fees, and amounts paid to a surrogate mother weren't deductible medical expenses for a male taxpayer who wasn't medically incapable of reproducing. Expenses incurred when there is no underlying medical condition or defect and which don't affect a structure or function of the taxpayer's body are nondeductible personal expenses within the meaning of Code Sec. 262 . The court distinguished the taxpayer's case from the situation discussed in IRS Letter Ruling 200318017 (footnote 7.2, above), noting that, in the instant case, the taxpayer could reproduce without medical intervention, but merely chose not to. 7.3
Magdalin, William, (2008) TC Memo 2008-293 , RIA TC Memo ¶2008-293 , 96 CCH TCM 491 , affd(2009, CA1) 105 AFTR 2d 2010-442 .
answered 31 Mar '10, 01:11
I'm aware of no reason that income reported on a 1099 misc as non employee income would be exempt just because it came from "donating" an egg. But it even if it exempt I can state with out doubt that you will definitely be getting an inquiry from the IRS about this income if it's not listed some where on your return.
Once a 1099 misc showing non employee income is filed with the IRS you can bet that the IRS will treat the reported amount as income and look for it to be either a line item entry or a sch c entry item. If for any reason this income should be exempt (and I'm not sure it should be exempt) you will need to contact who ever issued this 1099 misc and have them correct this error or you can expect to have a real fight with the IRS on this matter.
Remember the IRS has no way of knowing the nature or reason for the income listed on a 1099 misc beyond how it is reported by the filer of the 1099. That means that until proven other wise the IRS will consider it taxable income and it's for you to prove that it's not.
As to reporting the income from a one time activity as sch c income I don't see any reason that you couldn't. Just because it is a one time activity doesn't mean that you can't call it self employment income and report it on sch c. That could allow you to claim any expenses as well as using that income to qualify for other self employment type adjustments to income such as depositing to or starting and IRA retirement account. The main thing is that it's not required that you intend to perform an activity more than once for it to qualify as self employment reportable on sch c. I would report the income as a line item entry if there were no expenses or adjustments being made and on sch c if there were.
So what you need to do first is contact the person or firm that issued this 1099 misc as I'm sure they have done this before and can fill you in on how to treat this income. Then take the information they give you and get a second opinion from a local tax professional. There are many special cases that result from such activities and usually the people, firms, and lawyers involved in such activities know what they are doing as it's something they do all the time. I'm sure that if they didn't think that this "income" was reportable they wouldn't have ever issued you a 1099 misc. But the reason for the second opinion is that sometimes they are incorrect and issue such forms without knowing the tax laws as apply.
Just be sure that you full research this matter other wise you may get a nasty surprise in a couple of years when the IRS gets around to contacting you about this income and at that time it may be much harder to correct any income that's been incorrectly reported.
answered 29 Mar '10, 03:14
Unless you are self employed by a business of donating eggs, Katherine is correct. :)
answered 28 Mar '10, 19:06
I don't think that was the question? Free is free , but
sometimes the donors fee is like in the up to $25,000 range.
answered 28 Mar '10, 22:24
Remedy mention in her comment that this might qualify for LT gain. I don't think that is a possibility. Body parts aren't defined anywhere in the definitions of property. This is purely ordinary income to be listed on the miscellaneous income line of the 1040. No basis may be used to reduce the income.
answered 29 Mar '10, 13:57
For tax purposes, a donation is a gift for which you receive nothing in return. If money is paid to the person who supplies the eggs, then the IRS does not consider it a donation.
answered 04 Apr '10, 16:09
The assumption is that the compensation is for the eggs. Actually, the eggs are a donation and no money is exchanged for them. The egg donor compensation is payed for pain and suffering during the process. I received a 1099misc for this. How do I report this?
answered 06 Feb '12, 00:43
The donation of ones eggs is neither taxable to the Recipient or deductible for the Donner.
answered 28 Mar '10, 20:46
Pete Buser EA