Facts
- Dr. William Magdalin, a Massachusetts physician, sought to have additional children using an anonymous egg donor and unrelated gestational carriers.
- His fertility was normal, and he previously fathered children without assisted reproductive technology.
- In 2004, he contracted for eggs to be fertilized with his sperm and transferred to a gestational carrier through IVF.
- He entered into two gestational carrier agreements; one carrier gave birth in 2005, and another gave birth in 2006.
- The egg donor and both gestational carriers were not his spouse or dependents.
- He paid significant amounts in 2004 and 2005 for IVF-related clinic services, donor and carrier fees/expenses, and associated legal and agency fees and claimed most of the payments as medical expense deductions.
- The Commissioner disallowed the claimed medical expense deductions under I.R.C. § 213; other adjustments were conceded, leaving only the § 213 issue for decision on a stipulated record.
Issues
- Whether payments for IVF, egg-donor services, and unrelated gestational carrier services to enable the taxpayer to father children qualify as deductible “medical care” expenses under I.R.C. § 213.
Decision
- The Tax Court sustained the Commissioner’s disallowance of the claimed medical expense deductions for 2004 and 2005.
- The court held the expenses were not “medical care” under § 213 because they were not incurred to diagnose, cure, mitigate, treat, or prevent a disease of the taxpayer and were not incurred to affect a structure or function of the taxpayer’s body.
- The court further held that services performed on an egg donor and gestational carriers who were not the taxpayer’s spouse or dependents fell outside § 213’s statutory scope.
Legal Principles
- Under I.R.C. § 213, deductible medical expenses must be for “medical care” of the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependents.
- “Medical care” requires a sufficient connection to (1) the diagnosis, cure, mitigation, treatment, or prevention of disease, or (2) affecting a structure or function of the body of the taxpayer, spouse, or dependent.
- Expenses primarily for services performed on third parties who are not the taxpayer’s spouse or dependents do not become deductible medical care merely because they further the taxpayer’s personal objective of having a child.
- Absent an underlying medical condition of the taxpayer that the expenditures address, assisted reproduction-related costs tied to third-party donors/carriers are not deductible under § 213.
Conclusion
The Tax Court held that payments for IVF, egg-donor services, and unrelated gestational carrier services incurred to help a fertile taxpayer father children were not deductible medical expenses under I.R.C. § 213 because they lacked a causal link to treating a disease or affecting the taxpayer’s bodily structure or function and were largely for services provided to nondependent third parties.