Discussion:Organ Transplant, including donor expenses

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Discussion Forum Index --> Advanced Tax Questions --> Organ Transplant, including donor expenses


Discussion Forum Index --> Tax Questions --> Organ Transplant, including donor expenses

EADave (talk|edits) said:

17 April 2014
Hello all. I have a client, just a great guy who is literally watching his wife slowly die due to a liver disorder. Their new found hope is a partial liver transplant; his son is offering half of his liver to his mother (my client's wife). Apparently, after 6 weeks, each liver regenerates to a full-size liver; amazing!

Anyone with experience with this situation, can you tell me what the IRS means by allowing as a medical deduction the expenses for the transplant, "including donor expenses"? I can't find an elaborative text on this specific subject but what I'd like to know is exactly what expenses could the "donor" claim.

My client just needs some information to pass along to his son, in the hopes his son's medical expenses would surpass the 10% AGI threshold.

Thanks in advance all, please keep the peanut gallery antics to a minimum as this is a serious subject.

Ckenefick (talk|edits) said:

17 April 2014
Rev Rul 73-189,

Rev Rul 68-452,

PLR 7907019.

Ckenefick (talk|edits) said:

17 April 2014
http://usatoday30.usatoday.com/sports/college/baseball/2011-02-07-wake-forest-walter-kidney_N.htm

EADave (talk|edits) said:

17 April 2014
And if anyone ever had a doubt, Chris really is an android.

Thanks a bunch for the references my friend. Where are you headed after this site closes down, sir?

Ckenefick (talk|edits) said:

17 April 2014
Where ever everybody else goes. Doesn't matter to me.

Spell Czech (talk|edits) said:

18 April 2014
I couldn't tell by the context in the discussion, so I looked it up. The "donor expenses" are deductible by the person who pays them, either the recipient or the donor, or even somebody else, it seems, from IRS's description in their publication:

"Transplants
You can include in medical expenses amounts paid for medical care you receive because you are a donor or a possible donor of a kidney or other organ. This includes transportation.
You can include any expenses you pay for the medical care of a donor in connection with the donating of an organ. This includes transportation. "

Anybody got further details on who pays what and who gets to deduct it? This seems too simple for IRS...

If it's not obvious, I was too lazy to try to find CK's cited rulings.

Ckenefick (talk|edits) said:

18 April 2014
It's in the RR's. Whatever each party to the donation pays, each party deducts. If some random person pays, on behalf of a non-dependent, obviously, no medical deduction there for the payer.

EADave (talk|edits) said:

19 April 2014
I'll admit, I only found reference to the 1968 RR, I did find the 1973 RR and I couldn't find the PLR at all. Just try Googling PLR 7907019 and absolutely nothing comes up!!! Hilarious! Chris, if you have the PLR in print somewhere, could you C&P it sir?

Thanks!

Trillium (talk|edits) said:

19 April 2014
PLR: http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irl5a55/1/doc

This link - like all legalbitstream links - will expire after a couple of days. You can get back to it via www.legalbitstream.com, click on the PLR link along the left side of the page, and then put 7907019 into the search box.

Likewise, RR: http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irl5a59/1/doc (or click on the RR link on legalbitstream, then put 68-452 into the search box).

Spell Czech (talk|edits) said:

19 April 2014
"If some random person pays, on behalf of a non-dependent, obviously, no medical deduction there for the payer," says CK.

Are you sayin' the IRS is just foolin' us when their publication says "You can include any expenses you pay for the medical care of a donor in connection with the donating of an organ. This includes transportation." When I pick up the tab for a limo to bring my next door neighbor home from the hospital, after she donated a kidney to her nephew, are you telling me I *don't* get a medical deduction for the cost of the limo ride? I've been waiting for a long time to challenge IRS on this statement in their publication. I'm not asking for a charity deduction, and I'm not asking for the cost of the celebratory balloons and banners on her house. I'm asking about the medical transportation that I pay for my neighbor, a transplant donor. And I'm citing the IRS publication...

Spell Czech (talk|edits) said:

19 April 2014
But most of all I appreciated the glaring typo in the copy of IRS's letter ruling: "erratic telephone vice". Clearly, it should have read "erotic telephone vice".

Nilodop (talk|edits) said:

19 April 2014
Are you sayin' the IRS is just foolin' us...? Yup. (Also, I'm saying you know that, and you are enjoying pointing out how poorly the Pub is written).

Here's the rub:

There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), to the extent that such expenses exceed 10 percent of adjusted gross income.

Unless, of course, your neighbor is your spouse or your dependent.

Spell Czech (talk|edits) said:

19 April 2014
And you don't have to go through the whole litany of how deductions are a matter of legislative grace and how the Code trumps the Pubs and how the writers of the Pubs are just, uh, fallible humans, like all the rest of us.

But tell me you liked the typo...

Spell Czech (talk|edits) said:

19 April 2014
If an *unrelated donor* pays his transportation to and from the hospital, how does the Code say he gets a medical deduction for that? Seems a stretch, but a stretch that should be allowed. Am I reading this too carefully?

Nilodop (talk|edits) said:

19 April 2014
But tell me you liked the typo… Yep.

Am I reading this too carefully? Yep. In context, "you" refers to the taxpayer, his spouse, or a dependent.

Nilodop (talk|edits) said:

19 April 2014
If we read "too carefully", we can say "...to the extent that such expenses exceed 10 percent of adjusted gross income" can mean anyone's AGI - even yours.

Spell Czech (talk|edits) said:

19 April 2014
Rev Rul 73-189 (here's a link to it) gives a medical deduction to a prospective donor (who just happens to be the mother of the recipient, in the ruling) when the transplanted kidney doesn't come from the mother, but from the recipient's brother. But from my reading of that ruling, the mother has no medical condition, isn't subject to any surgery, but pays for her transportation and for some lab tests on the basis of which she's not chosen as the donor.

And the clincher: the mother seems not to claim the recipient as a dependent.

I probably don't have to point out but I will anyway that the recipient of the kidney (from the mother-as-taxpayer's point of view) is neither the taxpayer nor the taxpayer's spouse nor the taxpayer's dependent.

I think the Service has - nobly but without support - made the stretch that I was lobbying for just above (or a stretch very similar to what I was calling for).

From the perspective of the mother as taxpayer, she paid the expense of someone else's medical care and got the deduction. IRS doesn't even discuss how they arrived at that conclusion, which I find fascinating but also quite generous on their part.

Harry Boscoe (talk|edits) said:

20 April 2014
Click here for an interesting article dealing with the valuation of an organ transplant. An article that we will probably find we have to ignore.

And be sure not to miss this link to MauledAgain from that article...

In the absence of a kidney transplant *exchange* might the donor of the kidney be making a taxable gift to the recipient of the kidney?

Ckenefick (talk|edits) said:

20 April 2014
I think you're reading way too much into the RR and into the Pub. Basically, the ruling treats costs paid by a prospective donor (mom) the same as costs paid by the donor (brother) - Mom's costs are deductible to mom and brother's costs are deductible to brother.

In the absence of a kidney transplant *exchange* might the donor of the kidney be making a taxable gift to the recipient of the kidney?

I was just waiting for this line of thinking to be brought up. Maybe a gift for gift tax purposes, but income for income tax purposes?

Nilodop (talk|edits) said:

20 April 2014
Discussion:Medical and education deduction and other TA links make the point that the payment of medical expenses for someone who is related to the payer, but not as a spouse or dependent, is treated as a gift by the payer and a medical deduction by the donee. What is the basis in law for the very generous treatment by Rev Rul 73-189?

Isn't there a difference between an actual and a prospective donor? The actual one has his own medical expenses, though driven by the donee's problem. The prospective donor has no such expenses.

Ckenefick (talk|edits) said:

20 April 2014
What is the basis in law for the very generous treatment by Rev Rul 73-189?

Well, might be that the RR is a conclusion unto itself and is creating law, basically taking a position on what was maybe a "new" idea back in 1973 regarding organ donation. Did you know that Charles Lindbergh invented an artificial heart in the 1930's? It wasn't until the 1950's that we had our first transplant. Might also be that organ donation, all the way around, involved a medical procedure at the end of the day, or least an attempted one. I think you can write-off your well-visit even if nothing is found wrong.

Nilodop (talk|edits) said:

20 April 2014
Might also be that organ donation, all the way around, involved a medical procedure at the end of the day, or least an attempted one. I think you can write-off your well-visit even if nothing is found wrong. I agree with that analysis. And I agree that Spell is correct when he says … gives a medical deduction to a prospective donor (who just happens to be the mother of the recipient,…. It is the medical expense of the donor , related or not, in that the donor is incurring costs (such as transportation) in order to determine whether to undergo a medical procedure. Not different than going to the doc to have a physical exam when "nothing hurts".

So, in conclusion, a complete stranger can offer to be a donor, and deduct expenses paid in that connection, as his own medical expenses. But if the donee, or someone who is parent of donee, or can claim donee as a dependent, pays donor's expenses, that payer can deduct them.

Nilodop (talk|edits) said:

20 April 2014
Did you know that Charles Lindbergh invented an artificial heart in the 1930's? Well, did you know you can save 15% in 15 minutes …?

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