David Warren wrote:
and tell their spouses that the spouse does not look fat (and mostly do not get caught).
In Green v. Commissioner, 74 T.C. 1229 (1980), taxpayer’s blood contained rare
antibodies and was highly sought after by drug companies. Because of the frequency
of her blood sales, it was necessary for the taxpayer to eat a special diet, i.e., one
higher in protein than her ordinary requirements. The court held that, to the extent
substantiated, the taxpayer could deduct the cost of the special food that was beyond
that necessary for her personal needs. However, the court agreed with the Service that
the taxpayer was not entitled to a deduction simply because she would not have
incurred the expenses “but for” her sale of the blood plasma, and cited Drake v.
Commissioner, 52 T.C. 842 (1969), acq. 1970-2 C.B. xix (1970); and Kroll v.
Commissioner, 49 T.C. 557 (1969). Based on this holding, the court did not allow her
the portion of the food deduction necessary for her personal comfort.
(3) the Commissioner properly disallowed the deduction for the value of the donated blood because the donation of blood constitutes the performance of a service, which expressly does not qualify as a charitable contribution under the regulations.
Taxpayers argue on appeal that they are entitled to deduct the fair market value of the blood donated by Dr. Lary to the Red Cross. The district court, 608 F.Supp. 258, held that the blood donated was the contribution of a personal service, and thus not deductible, see Rev.Rul. 162, 1953-2 C.B. 127, but Taxpayers argue that the donation of blood is the contribution of property rather than the performance of a service. We need not decide whether the donation of blood constitutes the performance of a service or the contribution of a product because Taxpayers cannot claim a charitable deduction under either interpretation.1 If the donation of blood were the performance of a service, then Taxpayers are not entitled to a charitable deduction because the regulations expressly prohibit charitable deductions for the performance of services. See 26 C.F.R. Sec. 1.170A-1(g) (1985).2
On the other hand, if the donation of blood were the contribution of a product, Taxpayers would still not be entitled to a charitable deduction. Section 170(e)(1)(A) of the Internal Revenue Code of 1954 provides that the amount of any charitable contribution of property shall be reduced by "the amount of gain which would not have been long-term capital gain if the property contributed had been sold by the taxpayer at its fair market value (determined at the time of such contribution)." I.R.C. Sec. 170(e)(1)(A). In other words, if the property donated to charity would have resulted in ordinary income or short-term capital gain to the donor had the property instead been sold, the donor's charitable deduction would not include any amounts attributable to such gain, but rather would be limited to his adjusted basis in the property.
In the instant case, section 170(e)(1)(A)'s limitation on charitable contributions precludes any charitable deduction for the value of the donated blood. Taxpayers have proffered no evidence as to any basis in the donated blood or that the holding period for blood is more than six months,3 which is the required holding period for a capital asset to qualify for long-term capital gain treatment, see I.R.C. Sec. 1222(3) (West Supp.1985). Since Taxpayers have the burden of proof on both issues, see Cates v. Commissioner, 716 F.2d 1387, 1389 (11th Cir.1983) (taxpayer has burden of showing that he held capital asset for more than six months); Better Beverages, Inc. v. United States, 619 F.2d 424, 428 & n. 4 (5th Cir.1980) (taxpayer has burden of proof on question of basis in property),4 and since Taxpayers have made no effort to shoulder that burden, we conclude that Taxpayers are not entitled to a charitable deduction under section 170(e)(1)(A).
Thus, our resolution of this case leaves open the question whether the sale or contribution of blood is the performance of a service or the sale or contribution of a product, as did the former Fifth Circuit in United States v. Garber, 607 F.2d 92 (5th Cir.1979) (en banc). However, we do resolve one question arguably left open in Garber,5 i.e., that profit from the sale of blood does constitute income within the meaning of I.R.C. Sec. 61. Our alternative holding with respect to section 170(e)(1)(A) necessarily presupposes gain "if the property contributed had been sold." Our research has uncovered only one case squarely resolving this issue. In Green v. Commissioner, 74 T.C. 1229, 1232-33 (1980), the Tax Court, noting the sweeping language of section 61 itself and the expansive interpretation accorded to that language by the Supreme Court, held that a taxpayer's sale of blood gave rise to income as defined in section 61. With respect to this issue, we agree with the holding and rationale of the Tax Court.
Rink v. Chater
No. 94-1207-HA (D. Or. June 28, 1995). ; Clearinghouse Number: 50884
SSI Recipient’s Income from Selling His Blood Plasma May Be Disregarded as Earned Income
The district court has held that the income plaintiff SSI recipient derived from selling his blood plasma constituted earned income. Plaintiff earned up to $120 per month selling his blood plasma. SSA had sought to reduce plaintiff’s SSI benefits because it considered his income from the sale of his blood plasma to be unearned. On appeal, plaintiff argued that his income was earned because it was gained through self-employment in a trade or business and because it did not fall under any of the categories of unearned income in the regulations. Relying on Green v. Commissioner, 74 T.C. 1229 (1980), the court held that the sale of blood plasma constituted a trade or business. Because plaintiff incurred expenses for transportation to the plasma center and for maintaining a special diet high in iron and protein, he sold his plasma with the intention of making a profit and producing income. Income from the sale of blood plasma is unlike any of the categories of unearned income in the regulations because it results from an individual’s use of time, energy, or skill and is not passively received. Accordingly, the court held the income plaintiff derived from selling his blood plasma to be earned income under 20 C.F.R. § 416.1110 and therefore subject to the earned income disregards.
Claimant-Plaintiff represented by Karen Berkowitz, Multnomah County Legal Aid Serv., 300 United Carriage Bldg., 700 SW Taylor St., Portland, OR 97205, (503) 224-4086.