Q:

Subject: So how would you advise them?

Dear Mr. Kerstetter,

A friend and fellow lawyer pointed this article out to me and I thought you'd find it interesting.

Basically, can you be taxed on receipt of a kidney?

What I wonder is, if you and I each have a car of equal market value and we trade them, would we be taxed?  Beyond the obvious bio-ethics issues, I don't see the difference.

A:

As learned and entertaining as Professor Maule is, this is a perfect example of how ivory tower academics (and some attorneys I have known) love to let their imaginations go wild and conjure up scary tax scenarios out of what are actually innocent events.

If I were advising these people from my real world perspective on tax matters, I would have them sell their kidneys to each other for one dollar each and completely avoid the entire subjective valuation of a bartering transaction.  While the black market price for kidneys may be as much as $50,000 (per a recent episode of Nip/Tuck), each person is actually entitled to establish her own price.  While some cold-hearted bastards might say they should auction the kidneys to the highest bidders, basic private property rights allow us to set out own prices for things we own; so who is to say one dollar isn't appropriate?   

They can each prepare a bill of sale for one dollar and report the transactions on Schedule D of their 1040s, with a cost basis of zero.  The tax on one dollar of long term capital gain (acquisition date = date of their birth) will be the least of their worries.

Thanks for sharing that.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 12/16/2006 04:56:00 PM Send this post: