T.C. Memo. 2008-293
UNITED STATES TAX COURT
WILLIAM MAGDALIN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7880-07. Filed December 23, 2008.
R determined deficiencies in P’s Federal income
tax for 2004 and 2005. After P’s concessions, the sole
issue is whether P is entitled to deductions under sec.
213, I.R.C., for expenses incurred in fathering
children through unrelated gestational carriers via the
in vitro fertilization of an anonymous donor’s eggs
using P’s sperm.
Held: Because there is no causal relationship
between an underlying medical condition or defect and
P’s expenses, and because the expenses at issue were
not incurred for the purpose of affecting a structure
or function of P’s body, P is not entitled to
deductions for those expenses and is liable for the
deficiencies.
William Magdalin, pro se.
Daniel P. Ryan, for respondent.
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MEMORANDUM FINDINGS OF FACT AND OPINION
WHERRY, Judge: This case, which involves a petition for
redetermination of deficiencies for petitioner’s 2004 and 2005
tax years, has been submitted for decision without trial. See
Rule 122.1 In the notice of deficiency, respondent disallowed
deductions for medical expenses and charitable contributions
petitioner claimed for 2004 and 2005. Respondent also increased
the amount of taxable dividends petitioner reported for 2005.
Petitioner concedes the charitable contribution and dividend
issues. He challenges only respondent’s disallowance of the
deductions for medical expenses.
FINDINGS OF FACT
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).
In July 2004 petitioner entered into an Anonymous Egg Donor
Agreement under which an anonymous donor was to donate eggs to be
fertilized with petitioner’s sperm and transferred to a
1
Section references are to the Internal Revenue Code of
1986, as amended and in effect for the tax years at issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
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gestational carrier using the IVF process.2 That same month,
petitioner also entered into a Gestational Carrier Agreement in
which a woman (the first carrier) agreed to become impregnated
through the IVF embryo transfer process with the embryo created
from the anonymous donor’s egg and petitioner’s sperm and to bear
a child for petitioner. The first carrier gave birth to a child
on September 17, 2005.
On November 18, 2005, petitioner entered into a similar
Gestational Carrier Agreement with another woman (the second
carrier). The second carrier gave birth to a child on August 12,
2006. The donor was not the spouse or dependent of petitioner.
Nor was either of the carriers. Both IVF procedures occurred at
the Reproduction Science Center (IVF clinic) in Lexington,
Massachusetts.
Petitioner paid the following expenses in 2004 relating to
the aforementioned agreements: (1) $3,500 for petitioner’s legal
fees relating to the first donation cycle under the Anonymous Egg
Donor Agreement; (2) $500 for the donor’s legal fees relating to
the Anonymous Egg Donor Agreement; (3) $10,750 for the donor’s
fees and expenses; (4) $8,000 for the first carrier’s fees and
expenses; (5) $25,400 to the IVF clinic; and (6) $2,815 for
prescription drugs for the first carrier.
2
That agreement was amended in Dec. 2004 “in connection with
the arrangements for a second fresh egg donation cycle”.
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In 2005 petitioner paid the following relevant expenses:
(1) $750 for petitioner’s legal fees relating to the second
donation cycle under the Anonymous Egg Donor Agreement; (2)
$17,000 for the first carrier’s fees and expenses; (3) $14,270
for petitioner’s legal fees relating to the Gestational Carrier
Agreement with the second carrier; (4) $1,000 for the second
carrier’s legal fees relating to the Gestational Carrier
Agreement; (5) $2,615.10 to the IVF clinic; (6) $300 to Lawrence
General Hospital for costs relating to the first carrier’s stay
during delivery of the first child; (7) $1,181.25 for the first
carrier’s legal fees relating to legal proceedings concerning a
dispute over the issuance of the first child’s birth certificate;
and (8) $838 for prescription drugs for both carriers. There is
no evidence that petitioner was compensated for any of those
expenses by insurance or otherwise.
Petitioner filed his 2004 and 2005 Federal income tax
returns on time. On Schedules A, Itemized Deductions, included
with those returns he deducted medical expenses of $34,050 for
2004 and $28,230 for 2005.3 On March 22, 2007, respondent issued
petitioner a notice of deficiency for his 2004 and 2005 tax
years. Therein, respondent disallowed petitioner’s claimed
3
The total amounts of his claimed medical expenses were
$52,310 in 2004 and $43,593 in 2005. The amounts of the
deductions were less because a taxpayer can only deduct medical
expenses to the extent that they exceed 7.5 percent of the
taxpayer’s adjusted gross income for the year. Sec. 213(a).
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medical expense deductions in their entirety. On April 3, 2007,
petitioner, who then resided in Massachusetts, filed a timely
petition with this Court.
OPINION
I. Deductions for Medical Expenses4
Section 213(a) allows for the deduction of paid expenses
“not compensated for by insurance or otherwise, for medical care
of the taxpayer, his spouse, or a dependent * * * to the extent
that such expenses exceed 7.5 percent of adjusted gross income.”
While Congress has indicated an intent, once section 213 applies,
to broadly define medical care, see S. Rept. 1631, 77th Cong., 2d
Sess. 95-96 (1942), 1942-2 C.B. 504, 576, we have characterized
section 213 as carving out “a limited exception” to the general
rule in section 262 that prohibits the deduction of personal,
living, or family expenses. Jacobs v. Commissioner, 62 T.C. 813,
818 (1974); see Gerstacker v. Commissioner, 414 F.2d 448, 450
(6th Cir. 1969), revg. and remanding 49 T.C. 522 (1968).
Consequently, the medical expense deduction has been narrowly
construed for many years, as the Court noted more than 40 years
4
The taxpayer bears the burden of proving entitlement to the
claimed deductions. Rule 142(a); Welch v. Helvering, 290 U.S.
111 (1933); Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975),
affd. 540 F.2d 821 (5th Cir. 1976). Although sec. 7491(a) may
shift the burden of proof to the Commissioner in specified
circumstances, we need not decide which party bears the burden of
proof because the outcome in this case does not depend on the
burden of proof. Knudsen v. Commissioner, 131 T.C. __, __ (2008)
(slip op. at 8).
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ago in Atkinson v. Commissioner, 44 T.C. 39, 49 (1965). The
deductibility of the expenses at issue hinges on whether they
were paid for petitioner’s medical care. If so, they are
deductible medical expenses under section 213. If not, they are
nondeductible personal expenses under section 262.
The term “medical care” includes amounts paid “for the
diagnosis, cure, mitigation, treatment, or prevention of disease,
or for the purpose of affecting any structure or function of the
body”. Sec. 213(d)(1)(A). The regulations provide that
“Deductions for expenditures for medical care allowable under
section 213 will be confined strictly to expenses incurred
primarily for the prevention or alleviation of a physical or
mental defect or illness.” Sec. 1.213-1(e)(1)(ii), Income Tax
Regs.
We have interpreted the statute as requiring a causal
relationship in the form of a “but for” test between a medical
condition and the expenditures incurred in treating that
condition. See Jacobs v. Commissioner, supra at 818 (noting that
“the payment for which a deduction is claimed must be for goods
or services directly or proximately related to the diagnosis,
cure, mitigation, treatment, or prevention of the disease or
illness”); Havey v. Commissioner, 12 T.C. 409, 413 (1949) (“An
incidental benefit is not enough.”). The “but for” test requires
petitioner to prove (1) “that the expenditures were an essential
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element of the treatment” and (2) “that they would not have
otherwise been incurred for nonmedical reasons.” Jacobs v.
Commissioner, supra at 819.
It is also noteworthy that section 213(d)(1)(A), which is
not a model of clarity, is phrased disjunctively--it allows for
the deduction of any expenses paid “for the diagnosis, cure,
mitigation, treatment, or prevention of disease, or for the
purpose of affecting any structure or function of the body”.
Sec. 213(d)(1)(A) (emphasis added); see Dickie v. Commissioner,
T.C. Memo. 1999-138 (“The deductibility of medical care payments
under section 213 is not strictly limited to traditional medical
procedures, but it includes payments made for the purpose of
affecting any structure or function of the body.”). Although the
phrase “for the purpose of affecting any structure or function of
the body” was historically interpreted by the Internal Revenue
Service and the Court to allow taxpayers to deduct the costs of a
wide array of cosmetic procedures, Congress felt this was too
liberal a tax deduction because it resulted from a personal
expense and not a medical one. As a consequence, in 1990
Congress restricted taxpayers’ ability to do so.5
5
For example, the Internal Revenue Service used to permit a
medical expense deduction for a facelift, performed solely to
improve the taxpayer’s appearance, because its purpose was to
affect a structure of the taxpayer’s body. See Rev. Rul. 76-332,
1976-2 C.B. 81; see also Mattes v. Commissioner, 77 T.C. 650,
655-656 (1981) (allowing a taxpayer to deduct the cost of a hair
(continued...)
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II. Parties’ Contentions
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. While he
correctly acknowledges that Internal Revenue Service private
letter rulings are “not legal precedent”, he 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.”6 Respondent’s position is that the
5
(...continued)
transplantation procedure undertaken by the taxpayer for cosmetic
reasons). But Congress narrowed the range of deductible
procedures by enacting the Omnibus Budget Reconciliation Act of
1990, Pub. L. 101-508, sec. 11342(a), 104 Stat. 1388-471, which
added sec. 213(d)(9). Sec. 213(d)(9) provides that cosmetic
surgery or similar procedures are nondeductible personal expenses
“unless the surgery or procedure is necessary to ameliorate a
deformity arising from, or directly related to, a congenital
abnormality, a personal injury resulting from an accident or
trauma, or disfiguring disease.”
6
Respondent also argues that “the expenses paid by
petitioner were not for the purpose of affecting any structure or
(continued...)
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expenses at issue are nondeductible under section 262 because
“Petitioner’s choice to undertake these procedures was an
entirely personal/nonmedical decision.”
III. The Expenses at Issue Are Nondeductible Personal Expenses
The expenses at issue were not paid for medical care under
the first portion of section 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.” Sec. 1.213-1(e)(1)(ii),
Income Tax Regs. 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.7
6
(...continued)
function of petitioner’s male body” and that “the procedures at
issue only affected the structures or functions of the bodies of
the unrelated surrogate mothers.” In addition, respondent makes
the unexplained assertion that respondent “does not believe that
procreation is a covered function of petitioner’s male body
within the meaning of section 213(d)(1)”.
7
Under sec. 6110(k)(3) private letter rulings (PLRs) lack
precedential status. Nevertheless, “such rulings do reveal the
interpretation put upon the statute by the agency charged with
the responsibility of administering the revenue laws.” Hanover
(continued...)
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See supra note 6. 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.8
7
(...continued)
Bank v. Commissioner, 369 U.S. 672, 686 (1962); see Transco
Exploration Co. v. Commissioner, 949 F.2d 837, 840 (5th Cir.
1992), affg. 95 T.C. 373 (1990). In the PLR petitioner refers
to, the Internal Revenue Service (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 sec. 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.” Id.
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 sec. 213 if such
expenses are incurred “to overcome an inability to have
children.”
8
Where a medical procedure affects a structure or function
of the taxpayer’s body, the cost of such a procedure may be a
deductible medical expense unless proscribed by sec. 213(d)(9).
See supra note 5. A vasectomy is an example of a noncosmetic
operation that the Commissioner has determined is deductible
because it affects the structure of a taxpayer’s body. See Rev.
Rul. 73-201, 1973-1 C.B. 140.
The dictionary defines “affect” as “to produce an effect
upon” or “to produce a material influence upon or alteration in”.
Merriam-Webster’s Collegiate Dictionary 21 (11th ed. 2003).
Petitioner’s bodily functions and structures were not “affected”
by the IVF processes--they remained the same before and after
those processes.
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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 section
262.
The Court has considered all of petitioner’s contentions,
arguments, requests, and statements. To the extent not discussed
herein, we conclude that they are meritless, moot, or irrelevant.
To reflect the foregoing,
Decision will be entered
for respondent.