Facts
- Margaret Cramer Green regularly sold blood plasma to a laboratory in Pensacola, Florida, using a plasmapheresis process in which plasma was separated and red blood cells returned to her body.
- Green had a rare blood type, making her plasma valuable to purchasers who processed and marketed it.
- In 1976, Green made 95 plasma sales and was paid by the pint; she also received a $5 travel allowance per visit (totaling $475).
- Green’s plasma activity was her primary source of funds; she also earned wages from other employers during 1976.
- On her 1976 return, Green reported plasma receipts as income and claimed extensive deductions attributed to the plasma activity, including medical insurance premiums, special drugs, high-protein foods, transportation, and a claimed depletion allowance for “minerals and antibodies” in her blood.
- The Commissioner disallowed many claimed deductions and determined a 1976 income-tax deficiency of $577; Green petitioned the Tax Court.
Issues
- Whether payments received for plasma “donations” were income from a trade or business.
- Whether claimed costs (including health insurance, drugs, special diet foods, and transportation) were deductible as ordinary and necessary business expenses under I.R.C. § 162 or were nondeductible personal/medical expenses (deductible, if at all, under I.R.C. § 213).
- Whether a depletion deduction under I.R.C. § 611 was available for alleged depletion of “minerals and antibodies” from Green’s blood.
Decision
- The court held that Green’s plasma receipts were ordinary income from her trade or business of selling blood plasma.
- The court held that health insurance was an inherently personal expense, deductible only as allowed under the medical-expense rules of I.R.C. § 213, not as a § 162 business expense.
- The court rejected the claimed depletion allowance, holding that bodily losses from plasma sales are not depletion of “natural deposits” within I.R.C. § 611.
- The court allowed only limited business deductions to the extent specific expenses were shown to be directly connected to carrying on the plasma-selling business, and sustained the deficiency in part.
Legal Principles
- Regular, profit-motivated sales of blood plasma can constitute a trade or business, making receipts taxable as ordinary income and placing related deductions within the § 162 framework.
- Expenses that are inherently personal or medical (including health insurance and general health-maintenance costs) are not deductible under § 162; they are deductible, if at all, only under the medical-expense provisions of § 213.
- Transportation resembling commuting between home and a regular place of activity is generally personal and nondeductible; only amounts sufficiently connected to business activity may qualify under § 162.
- I.R.C. § 611 depletion applies to “natural deposits” in the statutory sense and does not extend to the human body or alleged depletion of blood constituents.
Conclusion
The Tax Court treated Green’s paid plasma “donations” as business income but limited deductions to those directly tied to the plasma-selling activity, reclassified health-related outlays as personal/medical items governed by § 213, and denied any depletion deduction because human blood is not a “natural deposit” under § 611.