Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Monday, August 27, 2012

Article on Tax Law and The Human Body

Bridget_CrawfordBridget J. Crawford (Professor of Law, Pace University School of Law) recently published her article entitled Our Bodies, Our (Tax) Selves, 31 Va. Tax Rev. 695 (2012).  The introduction to the article is available below: 

“Get paid for what you're already doing!” reads one sperm bank's advertisement.  “$50,000 for an extraordinary egg donor,” announces an advertisement in an Ivy-League college newspaper.  A robust commercial market in human reproductive material is the foundation for a multi-billion dollar fertility industry. Yet existing law does not provide a clear answer to the question of whether human reproductive material is property like any other. The tax law, for example, has never addressed the tax consequences of sales and gifts of human eggs and sperm. Courts and the Internal Revenue Service (Service) have ruled, however, on sales of blood plasma and human breast milk. Similarly, the law of trusts and estates is silent on the question of whether ova and sperm may be freely transferred at death. But in some contexts, the law permits posthumous reproduction.  Comprehensive and logical property-law treatment for eggs and sperm might lead to absurd results for human sexual relations. At the same time, however, ignoring the existing commercial market creates a de facto tax preference for the work of selling sperm or eggs.
This article proceeds in five parts. Part I surveys the existing markets for human bodily material--such as organs, blood, and tissue--as well as bodies themselves (i.e., corpses). There are more sick people who would benefit from donated kidneys, lungs, and blood than there are donors of this material. Hence, medical professionals and health advocacy group use public awareness campaigns to encourage organ donations. In some states, a signature on the back of one's driver's license can serve as legal evidence of the holder's desire to become an organ donor.  In these jurisdictions, it is easier for a person to make a death-time gift of his organs than, say, his marketable securities. Nevertheless, the persistent asymmetry between organ supply and demand has led to the development of an illegal market in human organs. News stories of suspected international organ traffickers shock the conscience and require us to contemplate whether the human body is itself property. If the body is always property, never property, or something in between, what does that mean for the law?
Part II considers how courts and the Service--unevenly and incompletely--have answered the question of whether the human body is property like any other. On the one hand, any judicial or administrative determination of the tax consequences of a particular transaction or item reveals only that-- i.e., how that transaction or item will be treated for tax purposes. On the other hand, if courts or rule-makers are to contemplate the tax consequences of a commercial trade in human blood and breast milk, then they must resolve baseline legal questions about the nature of the human body. 
Part III imagines and evaluates a hypothetical legal system that would treat human gametes as property like any other. The laws of wills and donative transfers could be adapted to apply to transfers of human ova and sperm, but also could trigger results that are undesirable from a policy perspective. The tax consequences of fully descendible human gametes would be significant, as well. If human gametes are just another type of personal property, then their sale should result in the recognition of taxable income, a lifetime gift could attract gift tax liability, and their value would be includable in a decedent's gross estate. If the applicable exemption from estate tax stays at $5 million, the estate tax inclusion would result in minimal or no additional tax revenue, but administrative and compliance costs would increase. Taxpayers would be required to disclose lifetime and death-time transfers that otherwise have not been routinely reported to the Service. The application of tax rules to transfers of human gametes is awkward, and may conflict with an intuitive argument that even if human gametes are “property,” their transfers might nevertheless escape gift and estate taxation, at least. The wealth transfer tax rules do not intend to reach all wealth transfers, and there is an argument to be made that the gift and estate tax should not apply to human gamete transfers.
Part IV extends the gift and estate tax analysis to consider how classifying human eggs or sperm as descendible and devisable property could have far-reaching and even absurd consequences for human sexual relations. In light of these hypothetical tax results, this Part considers proposals for an elective property regime for human gametes under which human eggs and sperm would be treated as property for some tax purposes, and as not property for other tax purposes. These proposals may lack consistency for tax purposes, but they comport with both common sense and the underlying realities of a commercial market in human gametes. The possibility that bodies are “property” for any purpose will offend many, no doubt. Entertaining the proposition, however, forces a clear articulation of the interests and policies that the laws of taxation (and reproductive technology) should serve.
Part V turns to policy considerations. Tax law will not be and should not be the primary lens for considering complex questions regarding human reproduction. Nevertheless, one can see that policy interests of predictability, fairness, and equity are enhanced by a consistent tax approach to the transfers of human reproductive matter. Failure to tax these transfers may contribute to information asymmetries in the human fertility market. These asymmetries benefit those other than the gamete providers themselves. A rule treating human gametes as descendible and taxable is preferable to the existing system, and such a rule is consistent with a legal system that maintains a strong commitment to individual autonomy.

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