When your body is your business

Washington Law Review

Volumn 85, Issue 4, 2010, Pages 647-686

  Holcomb, Morgan ^a   Byrn, Mary Patricia ^b  

^a HAMLINE UNIVERSITY   (United States)

^b William Mitchell College of Law   (United States)

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[No Author keywords available]

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EID: 79251616716     PISSN: 00430617     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (348)

1. MARGARET MITCHELL, GONE WITH THE WIND 471 (1936).
2. Intended parents are individuals who intend to be the legal parents of any child conceived through assisted reproductive technology, CHARLES P. KINDREGAN, JR. & MAUREEN MCBRIEN, ASSISTED REPRODUCTIVE TECHNOLOGY: A LAWYER'S GUIDE TO EMERGING LAW AND SCIENCE (2006). Throughout this Article, we use the term"intended parents" rather than"intended parent." By doing so, we do not assert that every child must have two parents. Our use of"intended parents" merely simplifies the text.
3. Surrogacy is the"process of carrying and delivering a child for another person." BLACK'S LAW DICTIONARY 1485 (8th ed. 2004). In re Baby M, 537 A.2d 1227 (N.J. 1988).
4. It is estimated that there are over 400 fertility clinics in the United States and that the assisted reproductive technology industry as a whole, of which surrogacy is a part, has annual revenues of nearly seven billion dollars. Judith F. Daar, Accessing Reproductive Technologies: Invisible Barriers, Indelible Harms, 23 BERKELEY J. GENDER L. & JUST. 18, 25-26 (2008).
5. The terms used to identify women who act as surrogates vary widely and can easily become confusing. Some professionals use the term" surrogate" only to refer to a woman who provides her own ovum (egg) and gestates a child for another person (also referred to as artificial insemination (or AI) surrogacy). These professionals use the term"gestational carrier" to refer to a woman who gestates a child for another person using either the intended mother's or a donor's egg (also referred to as in vitro fertilization (or IVF) surrogacy). For simplicity's sake, we refer collectively to all women who gestate a child for another person as"surrogates," distinguishing between the two types by referring to them as"traditional surrogates" (those who use their own egg) and"gestational surrogates" (those who use the intended mother's or a donor's egg).
6. LIZA MUNDY, EVERYTHING CONCEIVABLE 129 (2007) ("[P]arenting through surrogacy costs between $100,000 and $150,000, including payments to a surrogate, an egg donor, one or even two brokering agencies, a fertility clinic, lawyers, and assorted facilitators.")
7. see also DEBRA SPAR, THE BABY BUSINESS 92 (2006); Surrogacy and Egg Donation, NORTHEAST ASSISTED FERTILITY GROUP, http://www.assistedfertility.com/ faqs/fee.shtml (last visited June 2, 2010) (estimating the average cost for gestational surrogacy to be between $90,000 and $130,000);
8. Anticipated Program Costs for Gestational Surrogacy, CIRCLE SURROGACY, http://www.circlesurrogacy.com/ index.php/en/costs (last visited June 2, 2010) (discussing a detailed estimate of total program costs including agency fees, attorney's fees, screening fees, surrogate fees, and IVF insurance coverage totaling $80,000 to $120,000);
9. Surrogacy, ADOPTION.COM, http://adopting.adoption. com/child/surrogacy. html (last visited Sept. 21, 2010) (estimating the average cost of gestational surrogacy to be between $75,000 and $100,000). Reports vary, but the average surrogate appears to be paid between $13,000 and $24,000. Katherine Drabiak et al., Ethics, Law, and Commercial Surrogacy: A Call For Uniformity, 35 J.L. MED. & ETHICS 300, 303 (2007)
10. Lorraine Ali and Raina Kelly, The Curious Lives of Surrogates, NEWSWEEK, Apr. 7, 2008, at 45
11. MUNDY, supra note 6, at 133
12. ART, broadly speaking, encompasses any means to achieve pregnancy other than sexual intercourse.
13. See generally Daar, supra note 4
14. Katherine T. Pratt, Inconceivable? Deducting the Costs of Fertility Treatment, 89 CORNELL L. REV. 1121 (2004).
15. Jennifer Thomas, Money Woes Keeping Many Couples from Fertility Treatments, HEALTH DAY, Oct. 22, 2009; Stephanie Saul, Grievous Choice on Risky Path to Parenthood, N.Y. TIMES, Oct. 12, 2009
16. Pratt, supra note 8.
17. At least one academic has addressed the tax implications of surrogacy to surrogates. See generally Bridget J. Crawford, Taxation, Pregnancy and Privacy, 16 WM. & MARY J. WOMEN & L. 327 (2010)
18. Bridget J. Crawford, Taxing Surrogacy, SOC. SCI. RESEARCH NETWORK (Aug. 30, 2009), http://ssrn.com/abstract=1422180.
19. See infra Part II.
20. Scholars estimate that the ART industry, of which surrogacy is a part, has annual revenues of nearly seven billion dollars. Daar, supra note 4, at 25-26.
21. Lori B. Andrews & Lisa Douglas, Alternative Reproduction, 65 S. CAL. L. REV. 623, 671 (1991); see also, e.g., Fertility Helper Selection, INT'L ASSISTED REPROD. CENTER, http://www.fertilityhelp.com/index.php/FERTILITY- HELPER-SELECTION.html (last visited Oct. 23, 2010) ("Our surrogate screening procedures include mandatory psychological testing, release of prior obstetrical information, criminal background checks, health insurance policy review, medical testing, the completion of [a] 14-page application, and several interviews with our staff.").
22. Ali & Kelly, supra note 6, at 45. In 2000, the CDC reported 1210 attempted gestational surrogacy arrangements, twice the number attempted just three years earlier.
23. David P. Hamilton, She's Having Our Baby: Surrogacy Is on the Rise as In-Vitro Improves, WALL ST. J., Feb. 4, 2003, at D1. It is estimated that more than 25,000 women have given birth through formal surrogacy arrangements since 1970.
24. Elly Teman, The Social Construction of Surrogacy Research: An Anthropological Critique of the Psychosocial Scholarship on Surrogate Motherhood, 67 SOC. SCI. & MED. 1104, 1104 (2008). The overwhelming majority of these arrangements have had happy endings for all involved. Over 99% of surrogates have willingly surrendered the child to the intended parents and less than .01% of surrogacy cases have resulted in court battles between the surrogate and intended parents.
25. Id.
26. see also Judy Keen, Surrogate Relishes Unique Role, USA TODAY, Jan. 23, 2007, at D2 (stating that fewer than one-tenth of 1% of surrogacies result in litigation).
27. MUNDY, supra note 6, at 129 ("[P]arenting through surrogacy costs between $100,000 and $150,000, including payments to a surrogate, an egg donor, one or even two brokering agencies, a fertility clinic, lawyers, and assorted facilitators.")
28. see also Anticipated Program Costs for Gestational Surrogacy, CIRCLE SURROGACY, ttp://www.circlesurrogacy.com/index.php/en/costs (last visited June 2, 2010) (discussing a detailed estimate of total program costs including agency fees, attorney's fees, screening fees, surrogate fees, and IVF insurance coverage totaling $80,000 to $120,000)
29. Surrogacy, ADOPTION.COM, http://adopting.adoption.com/child/surrogacy. html (last visited June 2, 2010) (estimating the average cost of gestational surrogacy to be between $75,000 and $100,000)
30. Surrogacy and Egg Donation, NORTHEAST ASSISTED FERTILITY GROUP, http://www.assistedfertility.com/faqs/fee.shtml (last visited June 2, 2010) (averaging a total cost for gestational surrogacy to be $90,000 to $130,000)
31. Stephanie Saul, Building a Baby, with Few Ground Rules, N.Y. TIMES, Dec. 13, 2009, at A1 (explaining that surrogacy arrangements are largely for-profit and can be very lucrative).
32. Melinda M. Hohman & Christine B. Hagan, Satisfaction with Surrogate Mothering: A Relational Model, 4 J. HUM. BEHAV. SOC. ENV'T 61, 64 (2001)
33. see also Surrogacy Agency Comparisons, GROWING GENERATIONS, http://www.growinggenerations.com/surrogacy-program/intended-parents/ agency-comparisons (last visited Apr. 14, 2010) (describing the services offered by the agency). Depending upon the skills and experience of the surrogacy agency, it may also oversee all legal matters, including escrow management and the legal determination of parentage after the child is born.
34. Examples of such full-service agencies are ERICKSON LAW, http://www.ericksonlaw.net
35. GROWING GENERATIONS, http://www.growinggenerations.com
36. INT'L ASSISTED REPROD. CENTER, http://www.fertilityhelp.com, REPROD. POSSIBILITIES, LLC, http://www.reproductivepossibilities.com; and SURROGATE MOTHERS, INC., http:// www.surrogatemothers.com.
37. See Drabiak et al., supra note 6, at 301
38. See Drabiak et al., supra note 6, at 301; Jadva Vasanti et al., Surrogacy: The Experiences of Surrogate Mothers, 18 HUM. REPROD. 2196, 2199 (2003) (reporting the results of a survey that asked how women found out about surrogacy:"Twenty-three (68%) of the women had first heard about surrogacy from the media, five (15%) had first heard about it from a family member or a friend, and six (17%) reported a long-term awareness of surrogacy.").
39. See The Matching Process, CIRCLE SURROGACY, http://www.circlesurrogacy. com/ index.php/en/become-a-parent/matching-process (last visited Sept. 22, 2010) (describing the final pre-pregnancy preparations, including finalizing and signing contracts)
40. SURROGACY SPECIALISTS OF AM., http://www.ssa-agency.com (last visited Sept. 22, 2010) (discussing the agency's process for supplying attorneys to draft surrogacy contracts).
41. Questions Frequently Asked by Potential Gestational Carriers, CIRCLE SURROGACY, http://www.circlesurrogacy.com/index.php/become-a-surrogate/faqs (last visited Oct. 23, 2010) (explaining how the surrogacy payments are disbursed and explaining Circle Surrogacy's involvement in facilitating the payments)
42. Saul, supra note 15, at A1 (explaining that surrogacy arrangements are largely for-profit and can be very lucrative).
43. See Betsy P. Aigen, Motivations of Surrogate Mothers: Parenthood, Altruism and Self- Actualization, AM. SURROGACY CENTER, INC. (1996), http://www.surrogacy.com/psychres/article/motivat.html (last visited Oct. 8, 2010) (discussing the surrogate screening process).
44. The purpose of the medical testing is to ensure that the surrogate is medically able to conceive a child, carry a child to term, and give birth to a child free from diseases. See, e.g., Sample Gestational Surrogacy Contract, SURROMOMSONLINE.COM, http://www.surromomsonline.com/articles/gscontract.html (last visited Sept. 23, 2010) [hereinafter Surromomsonline GSC] ("The Embryo will have a medical examination, blood and other tests and psychological testing as determined by the genetic Parents and their advisors.")
45. Gary A. Debele, Gestational Carrier Agreement, http://www.wbdlaw.com (on file with author) [hereinafter Debele GCA] ("[P]rior to the embryo being implanted into [the surrogate's] uterus, all parties shall undergo testing for sexually transmitted diseases (STD's)
46. including but not limited to Hepatitis and Acquired Immune Deficiency Syndrome (AIDS)."). Psychological testing is required for all parties to ensure they fully understand the emotional implications of carrying a child to term and then giving that child to the intended parents.
47. Gestational Surrogacy Contract, ALL ABOUT SURROGACY.COM, http://www.allaboutsurrogacy.com/sample-contracts/GScontract1.htm (last visited Sept. 23, 2010) [hereinafter Allaboutsurrogacy GSC] ("Surrogate, Surrogate's Husband, Genetic Father and Intended Mother shall have psychological testing to the extent their medical advisors determine such testing necessary prior to the transfer and implantation of said embryo(s) to the Surrogate.").
48. See, e.g., Traditional Surrogacy Contract, SURROGATE MOTHERS ONLINE, http://www.surromomsonline.com/articles/ts-contract.htm (last visited Oct. 8, 2010) [hereinafter Surromomsonline TSC] ("Surrogate states and declares that she does not desire to have a parental relationship with any child born pursuant to this Agreement. It is her further belief that the child or children ⋯conceived pursuant to this Agreement are morally and contractually the Child of the Intended Parents ⋯.")
49. Allaboutsurrogacy GSC, supra note 21 ("The Surrogate and the Surrogate's Husband are a married couple willing to relinquish custody of a child born to the Surrogate for the benefit of and upbringing by the Genetic Father and Intended Mother.")
50. Gestational Surrogacy Agreement, AM. SURROGACY CENTER, INC., http://www.surrogacy.com/legals/gestcontract.html (last visited Sept. 23, 2010) [hereinafter Surrogacy GSA] ("It is the intent of the parties that neither the Carrier nor her husband shall have any physical or legal custody of or any parental rights or duties with respect to the child born of this gestational surrogacy process and that the Biological Parents shall exclusively have such custody and all parental rights and duties from the moment of the child's birth.").
51. Sharyn L. Roach Anleu, Reinforcing Gender Norms: Commercial and Altruistic Surrogacy, 1 ACTA SOCIOLOGICA 63, 65 (1990) ("[C]ontracts often specify what kinds of medical tests or procedures the surrogate will undergo and specify that she will not smoke cigarettes, drink alcohol or use illegal or non-prescription drugs.")
52. see, e.g., Gestational Surrogacy Contract, SURROGACY911.COM, http://www.surrogacy911.com/laws/gestational-contract-sample/ (last visited Oct. 9, 2010) [hereinafter Surrogacy911 GSC] ("The surrogate mother agrees and promises that she will not have sexual intercourse with anyone from the first day of her menstrual cycle before the embryo transfer procedure until the date that pregnancy has been confirmed.")
53. Surromomsonline GSC, supra note 21 ("Embryo carrier will not engage in any hazardous or inappropriate activity during the pregnancy.")
54. Allaboutsurrogacy GSC, supra note 21 ("The Surrogate agrees not to travel outside of the United States of America after the second trimester of the pregnancy.").
55. See, e.g., Surromomsonline GSC, supra note 21 ("Embryo Carrier will do everything reasonably appropriate for her good health and the good health of the fetus during pregnancy.")
56. Sample Gestational Surrogacy Agreement, ALL ABOUT SURROGACY.COM, http://www.allaboutsurrogacy.com/sample-contracts/TScontract2.htm (last visited Oct. 9, 2010) [hereinafter Allaboutsurrogacy GSA] ("Surrogate agrees to undergo an amniocentesis or other invasive testing to detect foetal genetic and congenital defects upon the request of Genetic Father ⋯.")
57. Debele GCA, supra note 21 ("Surrogate agrees that the intended parents shall be allowed to be present, and actively participate ⋯in all doctor or hospital examinations" and also agrees to"pump colostrums and provide that to [intended parents] for the benefit of the child."). The contract may also include language stating the surrogate follow contractual provisions related to sexual intercourse during the pregnancy.
58. See, e.g., Surrogacy911 GSC, supra note 23 ("The surrogate mother then agrees that she will not have unprotected intercourse with anyone other than her husband/boyfriend, if there is any, during the term of the pregnancy."). The intended parents could be excused from taking the child if genetic testing after birth proves the child to be the child of the surrogate's spouse or partner. KINDREGAN & MCBRIEN, supra note 2, at 298.
59. Elizabeth A. Trainor, Right of Husband, Wife, or Other Party to Custody of Frozen Embryo, Pre-Embryo, or Pre-Zygote in Event of Circumstances, 87 A.L.R.5th 253, 259 (2004) ("Typically the in vitro fertilization (IVF) procedure begins with hormonal stimulation of a woman's ovaries to produce multiple eggs.").
60. Stephanie Smith, Doubling of Maternal Deaths in U.S."Scandalous, " Rights Group Says, CNN.COM (Mar. 12, 2010), http://www.cnn.com/2010/ HEALTH/03/12/maternal.mortality/index.html.
61. Brenda M. Baker, A Case for Permitting Altruistic Surrogacy, 11 HYPATIA 34, 39 (1996) ("Studies of existing surrogacy programs have found that surrogates are usually women with families of their own who wish to re-experience the joy and ease of being pregnant, but who do not want to raise another child themselves.").
62. MUNDY, supra note 6, at 132.
63. Janice C. Ciccarelli & Linda J. Beckman, Navigating Rough Waters: An Overview of Psychological Aspects of Surrogacy, 61 J. SOC. ISSUES 21, 30 (2005)
64. see also Linda Kanefield, The Reparative Motive in Surrogate Mothers, 2 ADOPTION Q. 5, 12 (1999) ("'I can't imagine what it would be like for a woman who wants kids not to be able to have them. I can't think of anything else I could do for somebody that would mean so much. I feel like it's something I can do, and if I can do it, I should do it.'").
65. Surrogates are often strongly motivated by empathy with the infertile couple. Having found the experience of having children to be very important in their own lives, they desire to help another couple share this special experience.
66. Olga van den Akker, Genetic and Gestational Surrogate Mothers' Experience of Surrogacy, 21 J. REPROD. & INFANT PSYCH. 145, 146 (2003).
67. Ciccarelli & Beckman, supra note 29, at 31
68. R.J. Edelmann, Surrogacy: The Psychological Issues, 22 J. REPROD. & INFANT PSYCH. 123, 130 (2004)
69. see also Hohman & Hagan, supra note 16, at 63 (stating that most studies found that the majority of surrogate mothers are white, about twentyseven years old, married, and already mothers of about three children).
70. Kanefield, supra note 29, at 5 (explaining that surrogates generally demonstrate a considerable degree of stability, are psychologically stable, suffer from no mental illness, are involved in a supportive relationship, have children of their own, and are financially stable). Although the available research studies on surrogates tend to be small, making the results statistically inconclusive, the findings have been overwhelmingly consistent. In contrast to perceptions and fears commonly voiced in the modern media or in legislative hearings about surrogacy, most surrogates do not come from economically or socially vulnerable groups, do not report feeling exploited by the process, do not claim to be motivated solely by financial gain, and report being very satisfied with the experience-many even choose to be a surrogate for a second or third time.
71. See Ciccarelli & Beckman, supra note 29, at 31
72. Edelmann, supra note 31, at 127
73. Kanefield, supra note 29
74. Kanefield, supra note 29; see also Hohman & Hagan, supra note 16, at 63 (stating that studies show that surrogates tend to be from working-class backgrounds, have about one year of college, and work part-time or are full-time homemakers). Although surrogates do tend to be of a lower educational level and a lower social-economic class than the intended parents,"inequity is not an issue for them and, rather than feeling exploited, they firmly believe they are making an informed choice." van den Akker, supra note 30, at 146. According to Ciccarelli and Beckman's study, most"intended/social parents were married, white, and had incomes over $80,000 per year." Supra note 29, at 35.
75. See Ciccarelli & Beckman, supra note 29, at 34 (explaining that many surrogacy agencies in the United States will contract only with women who have previously given birth and have children of their own because it maximizes the chances of a successful birth and fulfillment of the surrogacy contract).
76. Teman, supra note 14, at 1107-08. Teman argues that it is a"cultural myth that 'normal' women do not relinquish their children voluntarily" and asserts that studies show that"surrogates are largely classifiable as conservative, moral women who independently make this non-normative decision and that bonding is not a 'natural' but a culturally constructed measure which is dependent upon the woman's own conscious decision and not upon any innate 'natural' predisposition." Id.
77. Olga B.A. van den Akker, Psychosocial Aspects of Surrogate Motherhood, 12 HUM. REPROD. UPDATE 53, 53 (2007)
78. see Edelmann, supra note 31, at 130 (explaining that it is common for surrogates to differentiate their surrogacy pregnancy from previous pregnancies because the surrogate knows the baby is not hers and considers it the adoptive couple's baby from the beginning)
79. Ciccarelli & Beckman, supra note 29, at 32 ("Several studies confirm that the surrogate mother generally forms a relationship with the couple rather than the child.").
80. Teman, supra note 14, at 1109 (citing numerous studies with similar results)
81. Vasanti, supra note 17, at 2196 (citing studies that show a surrogate's experience gestating a child for another person or couple is generally positive and that surrogates tend not to experience major difficulties in their relationship with the intended parents or in handing over the baby).
82. Cynthia Fruchtman, Considerations in Surrogacy Contracts, 21 WHITTIER L. REV. 429 (1999). The first known surrogacy contract in the United States was executed in 1976.
83. See Keith J. Hey, Assisted Conception and Surrogacy-Unfinished Business, 26 J. MARSHALL L. REV.775, 787 (1993) (referring to the first surrogacy contract executed in Michigan in 1976)
84. Amy M. Larkey, Redefining Motherhood: Determining Legal Maternity in Gestational Surrogacy Arrangements, 51 DRAKE L. REV. 605, 608 (2003) (explaining the history and current practices of surrogacy arrangements). The contract that becomes part of the surrogacy arrangement is at times referred to as a"surrogacy contract,""a gestational agreement," or a"gestational carrier agreement."
85. KINDREGAN & MCBRIEN, supra note 2, at 296 ("The initial recitals that typically are included in such contracts include the general purpose of the agreement; a definition of each party's role in the arrangement ⋯and a provision regarding anonymity.").
86. Debele GCA, supra note 21 ("[T]he parties agree to attempt the number of IVF cycles recommended by the responsible physician, but agree to discontinue their attempts upon the recommendation of the responsible physician.")
87. Surrogacy GSA, supra note 22 ("The Biological Father and Mother agree and understand that they are entering into this Agreement with the Carrier whereby the Biological Father and Mother agree to the placement of their embryo(s) conceived through IVF into the uterus of the Carrier for the purpose of impregnating the Carrier.")
88. Allaboutsurrogacy GSA, supra note 24 ("Genetic Father and Surrogate agree that no more than 2 embryos per cycle may be transferred into her uterus and that remaining embryos, if any, shall be cryopreserved.").
89. Surromomsonline GSC, supra note 21 ("[The surrogate] agrees to follow a transfer and prenatal medical examination schedule set by the attending Physician.")
90. Allaboutsurrogacy GSC, supra note 21 ("The Surrogate agrees to follow a prenatal examination schedule ⋯.").
91. Debele GCA, supra note21 (Surrogate agrees that the intended parents"shall be allowed to be present, and actively participate ⋯in all doctor or hospital examinations")
92. Surrogacy911 GSC, supra note 23 (genetic father and the intended mother are to select a physician and have complete access to all available medical records).
93. Many surrogacy contracts incorporate provisions related to abortion and fetal reduction. The surrogate has a constitutional right to have an abortion Many surrogacy contracts incorporate provisions related to abortion and fetal reduction. The surrogate has a constitutional right to have an abortion however, in many instances the parties to a surrogacy contract may insert a provision into the contract requiring that the surrogate waive her right to an abortion or stating that an abortion must be performed in certain circumstances.
94. Allaboutsurrogacy GSC, supra note 21 ("If the fetus(es) has been determined by any designated physician to be physically or psychologically abnormal, the decision to abort the pregnancy or not to abort the pregnancy shall be the sole decision of the Genetic Father and Intended Mother ⋯. In the event that the embryo transfer results in three (3) or more fetuses, the Parties to this Agreement may agree to fetal reduction in order to reduce the number of fetuses.")
95. Surrogacy911 GSC, supra note 23 ("The surrogate mother is to agree not to make [sic] an abortion upon her own discretion.").
96. Actual reimbursement expenses may include reimbursement for such items as medical expenses, life insurance premium payments, and parking fees paid by the surrogate.
97. See, e.g., Surrogacy911 GSC, supra note 23
98. Allaboutsurrogacy GSC, supra note 21.
99. Christine L. Kerian, Surrogacy: A Last Resort Alternative for Infertile Women or a Commodification of Women's Bodies and Children?, 12 WIS. WOMEN'S L.J. 113 (1997)
100. see, e.g., Surromomsonline GSC, supra note 21 ("Genetic Parents agree to pay Embryo Carrier as compensation for services provided that sum of $-.")
101. Debele GSA, supra note 21 ("The intended parents agree to pay [surrogate] the sum of $-.")
102. Surrogacy GSA, supra note 22 ("The biological parents agree to pay the Carrier as compensation for the services provided the sum of $- ⋯.").
103. See, e.g., Allaboutsurrogacy GSC, supra note 21 ("Genetic Father and Intended Mother shall pay for certain Living Expenses of the Surrogate subsequent to the confirmation of pregnancy ⋯.").
104. See, e.g., Allaboutsurrogacy GSC, supra note 21 ("[The intended parents will reimburse the surrogate] $0.X per mile for any/all surrogacy related expenses ⋯.")
105. Surrogacy GSA, supra note 22 ("In addition to the compensation set forth above, the Biological Parents agree to indemnify the Carrier for: (A) all reasonably documented incidental expenses, such as telephone toll charges, travel, [and] parking ⋯.").
106. See, e.g., Allaboutsurrogacy GSC, supra note 21 ("[The intended parents will reimburse the surrogate for] maternity clothing.")
107. Surromomsonline GSC, supra note 21 (including reimbursement for maternity clothing up to $500.00).
108. See, e.g., Allaboutsurrogacy GSA, supra note 24 ("Expenses incurred by Surrogate for travel, lost wages, telephone calls and miscellaneous expenses will be paid directly by the Genetic Father or reimbursed to Surrogate ⋯.")
109. Debele GCA, supra note 21 (providing for the reimbursement of surrogate's lost wages in the case she is put on bed rest during the pregnancy). In addition, the parties may agree to reimburse the surrogate's spouse for any lost wages incurred during the course of the implantation and pregnancy.
110. See, e.g., Allaboutsurrogacy GSC, supra note 21 ("In the event the Surrogate's Husband incurs lost wages as a result of the IVF, the total Living Expenses in (i) and (ii) shall be increased prorata at a rate of $-per day.").
111. See, e.g., Allaboutsurrogacy GSC, supra note 21 ("Surrogate shall be reimbursed for childcare expenses at a rate of $7 per hour for medical appointments related to the IVF procedure and any resulting pregnancy.")
112. See, e.g., Surromomsonline GSC, supra note 21 (Genetic Parents agree to pay Embryo Carrier as compensation for services provided the sum of $-.)
113. Debele GSA, supra note 21 ("The intended parents agree to pay [surrogate] the sum of $-.")
114. Surrogacy GSA, supra note 22 ("The biological parents agree to pay the Carrier as compensation for the services provided the sum of $- ⋯.").
115. This Article uses the term"base pay" to distinguish the payment for gestational services from reimbursed expenses.
116. SPAR, supra note 6, at 92. Reports vary, but the average surrogate appears to be paid between $13,000 and $25,000.
117. MUNDY, supra note 6, at 133 ("[S]urrogates get about $20,000, egg donors anywhere from $5,000 to $50,000.")
118. Drabiak et al., supra note 6, at 303.
119. See, e.g., Surrogate Fee Information, GROWING GENERATIONS, http://www.growinggenerations.com/surrogacy-program/surrogates/ financial-information (last visited Sept. 23, 2010).
120. MUNDY, supra note 6, at 130. Debra Spar calculated that U.S. surrogates received over $27 million in compensation in 2004. SPAR, supra note 6, at 3.
121. SPAR, supra note 6, at 3.
122. See, e.g., Surrogacy Taxes, INFORMATION ON SURROGACY, http://www.information-onsurrogacy.com/surrogacy-taxes.html (last visited Oct. 9, 2010) ( &auot;Most contracts have ⋯wordings that usually circumvent the need for taxes to be paid on compensation."). Part of the rationale for the omission could be that surrogates are not properly advised of their tax obligations.
123. See KINDREGAN & MCBRIEN, supra note 2, at 302-03 (noting the uncertainty surrounding the characterization of compensation to surrogates and providing a"drafting tip" that contracts"should contain a clause regarding taxes, noting that the parties are not being advised as to taxation and that it is their responsibility to report payments received in connection with services rendered under the contract if they deem it necessary under applicable tax law").
124. I.R.C. § 61 (2006). This is in contrast to, for example, gifts, which are not taxed at all to the recipient. I.R.C. § 102(a).
125. Comm'r v. Glenshaw Glass, 348 U.S. 426, 431 (1955) (defining income as an accession to wealth that is clearly realized, over which the taxpayer has complete dominion). We say"almost" because some transfers will fit the Glenshaw Glass definition of"income" but are specifically excluded through some other Code provision.
126. We are not the first academics to recognize this reality.
127. See, e.g., Natalie Loder Clark, New Wine in Old Skins: Using Paternity-Suit Settlements to Facilitate Surrogate Motherhood, 25 J. FAM. L. 483, 514 (1986-87) ("One must also note that child support payments made to mother [sic] are not taxable income to her, while contractual payments to her for the services of pregnancy and birth presumably are.")
128. Crawford, Taxing Surrogacy, supra note 10
129. Crawford, Taxation, Pregnancy and Privacy, supra note 10.
130. See, e.g., MICH. COMP. LAWS ANN. § § 722.851-.863 (2002 and Supp. 2010). It is a felony in Michigan to arrange or assist in the formation of a contract for surrogacy and is punishable by fine of no more than $50,000.
131. See id. § 722.857."A surrogate parentage contract is void and unenforceable as contrary to public policy." Id. § 722.855.
132. James v. United States, 366 U.S. 213, 219 (1961) (holding that illegal income is taxable).
133. KINDREGAN & MCBRIEN, supra note 2, at 302-03.
134. See, e.g., Surromomsonline GSC, supra note 22 ("This Agreement does not instruct the Parties on immigration and taxation. It is the responsibility of the Party receiving payments or any other benefits pursuant to this Agreement to seek independent legal advice regarding the tax consequences of said payments, benefits and/or immigration laws.")
135. Surrogate Services Agreement, REPROD. ASSISTANCE, INC., http://www.reproassistinc.com/SurrogateAgreement8-1-2007.pdf (last visited Oct. 9, 2010) [hereinafter Reproassistinc SSA] ("The monetary compensation received may or may not be tax deductible. Surrogate should seek tax advice from an accountant.").
136. Jennifer L. Watson, Growing a Baby For Sale or Merely Renting a Womb: Should Surrogate Mothers Be Compensated for Their Services?, 6 WHITTIER J. CHILD & FAM. ADVOC. 529, 552 (2007) (suggesting gift treatment for surrogacy payments)
137. see Question re: Income and How It Affects My Taxes, SURROGATE MOTHER, http://www.surrogatemother.com/forum/topics/questionre- income-and-how-it (last visited Oct. 9, 2010) (commenting on a discussion board that many experienced surrogates felt they did not need to report their payments as income)
138. see also Taxes, SURROGATE MOTHER, http://www.surrogatemother.com/forum/ topics/taxes-1 (last visited Oct. 9, 2010).
139. See, e.g., Debele GCA, supra note 21
140. Surromomsonline TSC, supra note 22 ("In consideration of ⋯pain and suffering ⋯incurred by Surrogate in performance of all the terms and obligations set forth in this Agreement, Intended Parents shall pay or cause to be paid the amounts specified below.").
141. Surrogacy Taxes, INFORMATION ON SURROGACY, http://www.information-on- surrogacy.com/ surrogacy-taxes.html (last visited Oct. 30, 2010) ("[A]nother commonly untaxed exclusion is that of pre-birth child support. The intended parents are paying for the prenatal care of their unborn child, and are compensating the surrogate mother with her expenses while pregnant.")
142. see also, e.g., Allaboutsurrogacy GSA, supra note 24 ("In recognition of the Genetic Father's obligation to support his child being carried by the Surrogate and for the cost of the Surrogate to care for the child. Genetic Father shall pay the total sum of [amount].").
143. KINDREGAN & MCBRIEN, supra note 2, at 301-02 (noting that in some cases reimbursement fees can seem excessive, suggesting that compensation is in fact involved)
144. see, e.g., Surrogacy911 GSC, supra note 23 (providing only for payment of expenses); Allaboutsurrogacy GSC, supra note 21 (same).
145. See Taxes, SURROGATE MOTHER, supra note 63
146. see also George Saenz, Tax Talk, BANKRATE.COM, http://www.bankrate.com/ brm/itax/tax-adviser/20050524a1.asp (last visited Oct. 10, 2010) (answering a question posed by a surrogate on whether her services were a gift: "[A]lthough your generosity allowed a couple to have a child, I can't see how that would change the fact that you were compensated for your services. In fact, the payment would not be considered a gift, as it was not made with gratuitous intent.").
147. See infra Part III.A.
148. I.R.C. § 102(c)(1) (2006) (providing that the gift exclusion"shall not exclude from gross income any amount transferred by or for an employer to, or for the benefit of, an employee."). IRS regulations provide that"extraordinary transfers to the natural objects of an employer's bounty" are exempt from Section 102(c). Treas. Reg. § 1.102-1(f)(2) (1989). Therefore, Section 102(c) would not prevent gift treatment if a mother transferred a car to her son, who was also her employee, so long as the transfer"can be substantially attributed to the familial relationship. "
149. See id. In rare circumstances there is room to argue for gift status in the employment setting. Specifically, the Tax Court has observed that"payment from an employer to an employee solely for personal reasons can still be a gift if the payment is completely unrelated to the employment relationship and reflects no expectation of a business benefit." Larsen v. Comm'r, 95 T.C.M. (CCH) 1273, 1275 (2008) (quoting Williams v. Comm'r, 85 T.C.M. (CCH) 1113 (2003)) (emphasis added). A gestational surrogate would be very hard pressed to fall within this exception. Few gestational surrogates have preexisting relationships with the intended parents with whom they work
150. See supra note 4 and accompanying text, noting the total revenue figures for the ART industry.
151. 363 U.S. 278 (1960).
152. Id. at 285 (citations omitted). The Court noted that"a voluntarily executed transfer of ⋯ property by one to another, without any consideration or compensation" is not necessarily a"gift" within the meaning of the income tax statute. Id. Similarly, the mere absence of legal duty does not establish a"gift." Id.
153. Id. at 289 (stating that the decision rests"ultimately on the application of the fact-finding tribunal's experience with the mainsprings of human conduct to the totality of the facts of each case").
154. In Duberstein, the Court warned that"the donor's characterization of his action is not determinative" and dictated that"there must be an objective inquiry into whether what is called a gift amounts to it in reality." 363 U.S. at 286
155. see also, e.g., Dexter v. United States, 306 F. Supp. 415, 426 (N.D. Miss. 1969) (rejecting taxpayer's claim that the property deeded to her by her father via his will was a gift for federal income tax purposes, and noting that"the Court cannot accept or consider as conclusive the language used in the deed and will, indicating the transfer to be a gift" because the father's"intention must be determined by a consideration of all evidence in the case").
156. Hohman & Hagan, supra note 16, at 63 ("Ragone ⋯ found that the surrogates and parents were encouraged to be close and have frequent contacts ⋯ . These relationships usually became quite intense, whereby the parents would go to the doctor with the surrogates, take her out to lunch, speak to her on the phone frequently, give her presents, etc.").
157. Id.
158. Teman, supra note 14, at 1110 ("The most popular motivations found among surrogates across studies have been an enjoyment of being pregnant, a feeling of sympathy for childless couples, a desire to earn money as stay-at-home moms, and a desire to do something 'special.'")
159. van den Akker, supra note 30, at 156 ("The present study and previous research have found no evidence ⋯ that most surrogates' primary motives for participating in these arrangement is first and foremost for financial gain.").
160. Drabiak et. al., supra note 6, at 304.
161. Hele ́na Ragone ́, The Gift of Life: Surrogate Motherhood, Gamete Donation, and Constructions of Altruism in TRANSFORMATIVE MOTHERHOOD 65, 66 (Linda L. Layne, ed., 1999
162. Kanefield, supra note 29, at 9 ("I think of it as a gift I'm carrying. I won't get attached and want to keep it.").
163. Kanefield, supra note 29, at 10
164. Ragone ́, supra note 79, at 68 ("When questioned about remuneration, surrogates consistently protest that no one would become a surrogate for the money alone because, they reason, it simply 'isn't enough.'").
165. We say"most often" because in some instances, a woman will serve as a surrogate for a close friend or family member. In those situations, the gift argument is more likely to prevail.
166. Comm'r v. Duberstein, 363 U.S. 278, 285 (1960).
167. Id.
168. In addition, similar arguments made by other service providers have failed. Waitresses and casino dealers have argued that the gratuities they receive from patrons are more akin to gifts than to wages, and should be excluded from income. Nonetheless, it is established that tips and tokes are not gifts, but income to the recipient. Roberts v. Comm'r, 176 F.2d 221, 225 (9th Cir. 1949) (holding that tips are income)
169. Olk v. United States, 536 F.2d 876, 879 (9th Cir. 1976) (holding that tokes are income). Tokes are gratuities given to gambling dealers, usually when a gambling patron wins a hand.
170. See, e.g., Olk, 536 F.2d at 877. A news report of a $10,000 tip has raised questions about the steadfastness of this rule.
171. See Bartender Gets $10,000 Tip on $26 Tab, MSNBC (Aug. 31, 2006, 11:15 AM), http://www.msnbc.msn.com/id/14598504. Nonetheless, in the ordinary case, tips are not gifts, but income.
172. See, e.g., INFORMATION ON SURROGACY, supra note 65 (noting"[m]ost contracts have one of two different wordings that usually circumvent the need for taxes to be paid on compensation" and characterizing payments to surrogates as for pain and suffering or as pre-birth child support)
173. SURROGATE MOTHER, supra note 63. Numerous visitors on the site have commented that surrogacy payments qualify as"pain and suffering" payments
174. For example, in Revenue Ruling 85-97, a taxpayer, who was seriously injured when struck by a bus, was permitted to exclude the entire settlement amount because it represented compensation for the taxpayer's injuries. Rev. Rul. 85-97, 1985-2 C.B. 50.
175. I.R.C. § 104(a)(2) (2006).
176. Common complaints during pregnancy include headaches, morning sickness, constipation, hemorrhoids, back pain, and ankle swelling.
177. See, e.g., Healthy Pregnancy, MAYO CLINIC, http://www.mayoclinic.com/ health/pregnancy-week-by-week/MY00331 (last visited Oct. 1, 2009). More serious conditions, such as gestational diabetes and pre-eclampsia can also develop. Id. Women report varying levels of physical pain during labor, and although some pain can be avoided or mitigated through proper anesthesia, not all laboring women choose anesthesia
178. See, e.g., Labor and Delivery, Postpartum Care, MAYO CLINIC, http://www.mayoclinic.com/health/labor-and-delivery/PR00105 (last visited Oct. 1, 2009). Also, for various reasons, not all anesthesia options are available to all women.
179. See, e.g., Epidural Anesthesia, AM. PREGNANCY ASS'N, http://www. americanpregnancy.org/labornbirth/epidural.html (last visited Oct. 1, 2009) (noting that epidurals cannot be given to women on blood thinners or with low platelet counts).
180. Recent proposed regulations contemplate an elimination of the tort requirement, and could complicate the above analysis
181. Prop. Treas. Reg. § 1.104-1, 74 Fed. Reg. 47152 (Sept. 15, 2009). This proposed change does not contemplate a radical revision of the Section 104(a)(2), but the elimination of the tort requirement could make it easier for surrogates (and others) to argue that any compensation for pain and suffering ought to be excluded from income. Such an argument would ultimately fail, because the statutory language itself requires that the amount excluded be"damages." Although not as clear as a tort-requirement, the use of the term"damages" prevents an overly broad reading of this exception because"damages" implies, and indeed might require, a nonconsensual event. Id. § 1.104-1(c) (defining"damages" as"an amount received (other than workers' compensation) through prosecution of a legal suit or action, or through a settlement agreement entered into in lieu of prosecution");
182. see also BLACK'S LAW DICTIONARY 445 (9th ed. 2009) (defining" damage" as"of or relating to monetary compensation for loss or injury to a person or property")
183. 589 F.2d 843 (1979).
184. Id.; accord Green v. Comm'r, 74 T.C. 1229, 1230 (1980) (holding that proceeds from sale of plasma must be included in income).
185. 589 F.2d at 847 (noting that"[i]n applying section 104(a)(2) courts have uniformly assumed that the exclusion applies only to payments resulting from the prosecution or settlement of a tort claim" and holding that because there was no"suggestion that the payments to [the taxpayer] were in settlement of a possible tort liability, these payments could not as a matter of law fall within the exclusion of section 104(a)(2)").
186. See, e.g., David Gelman, The Most Dangerous Game, NEWSWEEK, Dec. 14, 1992, at 66
187. INFORMATION ON SURROGACY, supra note 65 ("[A]nother commonly untaxed exclusion is that of pre-birth child support. The intended parents are paying for the prenatal care of their unborn child, and are compensating the surrogate mother with her expenses while pregnant."
188. see also, e.g., Allaboutsurrogacy GSA, supra note 24 ("In recognition of the Genetic Father's obligation to support his child being carried by the Surrogate and for the cost of the Surrogate to care for the child. Genetic Father shall pay the total sum of [amount].").
189. I.R.C. § 71(b)-(c) (2006) (noting that alimony is included in the income of the payee; child support is not alimony). The corollary is that child support payments are not deductible by the payor (the non-custodial parent);
190. see also I.R.C. § 215(a) (2006) (classifying alimony as deductible to the payor).
191. Hayutin v. Comm'r, 508 F.2d 462, 468 (10th Cir. 1974) (noting that the characterization placed by state court upon transfer of property from husband to wife in a property settlement is not controlling for tax purposes)
192. Deborah A. Geier, Simplifying and Rationalizing the Federal Income Tax Law Applicable to Transfers in Divorce, 55 TAX LAW. 363, 364 (2002) (explaining that"[p]ayments that would be characterized as 'alimony' for tax purposes may constitute 'child support' or a 'property settlement' under state law, and vice versa.").
193. Marci Kelly, Calling a Spade a Spade: The Failure of Matrimonial Tax Reform, 44 TAX LAW.787, 795 (1991
194. Kanefield, supra note 29, at 9 (1999) (noting that some surrogates"look toward the additional income as a down payment on a house, or a car, a way to get out of debt, an investment for their children's education").
195. See, e.g., MINN. STAT. § § 257.66, .75 (2008) for an example of paternity being established by court order or by the parents voluntarily executing a document called the Recognition of Parentage. In most cases, establishing paternity is relatively simple, but if it is contested or there are multiple possible fathers, a court may order an alleged father to pay temporary child support. E.g., id. § 257.62, subdiv. 5.
196. E.g., In re Marriage of Godwin, 567 P.2d 144, 145 (Or. Ct. App. 1977); Edwards v. Sandusky, 448 N.E.2d 506, 510 (Ohio Ct. App. 1982).
197. See, e.g., MINN. STAT. § 257.66 (2008). The Minnesota statute is based on section 15(c) of the 1973 Uniform Parentage Act.
198. See UNIF. PARENTAGE ACT § 15(c), 9B U.L.A. 465 (1973).The 1973 version of the Uniform Parentage Act has been adopted (possibly with revisions) by Alabama, California, Colorado, Delaware, Hawaii, Illinois, Kansas, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, North Dakota, Ohio, Rhode Island, Washington, and Wyoming. 9B U.L.A. 377.
199. See Bunge v. Zachman, 578 N.W.2d 387, 389-90 (Minn. Ct. App. 1998)
200. In re Paternity of W.L., 855 P.2d 521, 523-24 (Mont. 1993)
201. Jelen v. Price, 458 N.E.2d 1267, 1270 (Ohio Ct. App. 1983).
202. John Dwight Ingram, Surrogate Gestator: A New and Honorable Profession, 76 MARQ. L. REV. 675, 689-91 (1993) (discussing surrogate compensation).
203. JANET LEACH RICHARDS, MASTERING FAMILY LAW 145 (2009).
204. See, e.g., Jami L. Zehr, Using Gestational Surrogacy and Pre-Implantation Genetic Diagnosis: Are Intended Parents Now Manufacturing the Idyllic Infant?, 20 LOY. CONSUMER L. REV. 294, 301 (2008
205. Ingram, supra note 104, at 687-88 (noting the very low risk of unyielding"maternal bonding" on the part of the gestational surrogate)
206. Cf. id. at 687 (likening the relationship between gestational surrogate and fetus to that between a nanny or housekeeper and her charge). Although we have not seen attempts to do so, payments to surrogates would not qualify as"foster care" payments for federal tax purposes. Although foster care payments typically are not included in income, such payments must come from a state or political subdivision, and must be made on behalf of a"qualified foster individual." IRC § 131(a)-(b) (2006). The statute does not address unborn children.
207. See id.
208. KINDREGAN & MCBRIEN, supra note 2, at 302-03 (advising that contract include explicit language on reimbursement).
209. See generally John A. Miller & Robert Pikowsky, Taxation and the Sabbatical: Doctrine, Planning and Policy, 63 TAX LAW. 375, 384 (2010) (describing how, in the proper circumstances, professors on sabbatical need not report reimbursed expenses).
210. Treas. Reg. § 1.62-2(c)(4)-(5) (2003)
211. Rev. Proc., 2008-59, 2008-41 I.R.B. 858.
212. Technical requirements must be met for the reimbursement to qualify as an above-the-line wash.
213. See 34 AM. JUR. 2D Federal Taxation § 17801;
214. Temp. Treas. Reg. § 1.274-5T(f)(2) (2010). A plan satisfies the requirements of an"accountable plan" if the employees are required to make an"adequate accounting" to the employer for their expenses. The regulations define adequate accounting as a submission to the employer of the documentary evidence required to substantiate travel and entertainment expenses. Id.; Employee Reimbursement Plans, INTERNAL REVENUE SERVICE, http://www.irs.gov/govt/fslg/article/0id=164471,00.html (last visited Oct. 10, 2010). If the plan does not meet the requirements, all payments under the arrangement are treated as made under a nonaccountable plan-in other"ords, the payments are income and must bereported. The employee can then take a deduction if appropriate. Treas. Reg. 1.62-2(c)(5) (2003).
215. See also INTERNAL REVENUE SERV., MISCELLANEOUS DEDUCTIONS 3 (2009), available at http://www.irs.gov/pub/irs-pdf/p529.pdf. In some circumstances, similar expenses paid on behalf of independent contractors, rather than employees, can qualify for similar treatment. United States v. Gotcher, 401 F.2d 118 (5th Cir. 1968).
216. See Miller & Pikowsky, supra note 110, at 384 (explaining the impact of employee reimbursements: "How then should a reimbursement of an otherwise deductible expense be treated? In the first place, it should be understood that the reimbursement is itself income. But since it is offset by an expense, the net tax effect should be zero.").
217. KINDREGAN & MCBRIEN, supra note 2, at 301-02 (noting that in some cases "reimbursement fees can appear excessive, suggesting that compensation is in fact involved")
218. Surrogacy911 GSC, supra note 23 (providing only for payment of expenses); Allaboutsurrogacy GSC, supra note 21 (same). In some states, this tax incentive is coupled with another equally powerful incentive to creatively characterize payments. In particular, in states that prohibit surrogacy compensation, parties attempt to circumvent the statute by providing that all compensation is reimbursement, even when the parties have agreed to an "over and above expenses" amount. Whether this duplicity suffices to circumvent the prohibition on paying surrogates is beyond the scope of this Article. However, it is clear that it will not suffice to avoid income and the concomitant taxes.
219. Surrogacy attorneys we have spoken with believe that this phenomenon is a trend in surrogacy. They suggest that the surrogacy industry has borrowed this practice from the adoption context. In that context, birth mothers cannot be paid in exchange for giving up babies, as that would amount to prohibited baby selling, but birth mothers can be reimbursed for expenses. Several states permit reimbursement to birth mothers not just for out-of-pocket expenses, but also for living expenses. Because living expenses is a vague term, the reimbursement can become significant.
220. See generally Andrea B. Carroll, Re-Regulating the Baby Market: A Call for a Ban on Payment of Birth Mother Living Expenses, 59 KAN. L. REV. (forthcoming 2010) (criticizing the permissive nature of state regulation and likening the payment of living expenses to baby selling).
221. Miller & Pikowsky, supra note 110, at 381-84 (explaining the concept of "tax home" and describing that taxpayers may deduct the cost of housing only when away from that "tax home").
222. Although at first blush, it may seem that surrogates are neither employees nor independent contractors; for tax purposes, surrogates must be one or the other. If a surrogate is not an employee, she is, by default, an independent contractor
223. See Louis Lyons, Congressional Campaign Workers: Independent Contractors or Employees? Politics, Taxes, and the Limits of the Internal Revenue Service's Authority over Employment Classification, 8 ADMIN. L.J. AM. U. 371, 371 n.3 (1994) ("[T]ax law requires that a worker be classified either as an independent contractor or an employee." (citing L.A. Cnty. Bar Ass'n Section of Taxation, Legislative Proposal on Classification of Workers as Employees or Independent Contractors, 55 TAX NOTES 821, 822 (1992))).
224. I.R.C. § § 1401-1402 (2006) (imposing obligations on self-employed individuals similar to the FICA tax). Independent contractors, like all self-employed workers, must pay self-employment taxes, which they must calculate, report, and remit. These taxes are similar to the social security and Medicare taxes withheld from the pay of most wage earners. They must file a Schedule C or C-EZ in addition to their 1040 forms. If classified as an independent contractor, the surrogate might receive a 1099 from an agency. Some online discussion among surrogates focuses on which agencies issue 1099 forms. What Agency or Attorney Gives Out 1099's?, SURROGATE MOTHERS ONLINE, http://www.surromomsonline.com/support/showthread.php?p=1604396 (last visited Oct. 8, 2010) (providing a "sticky note" listing surrogate agencies that issue 1099 forms and those that do not). Some sperm banks and egg donation agencies make a practice of issuing the form.
225. See California Cryobank Sperm Donor Compensation, SPERMBANK.COM, http://www.spermbank.com/newdonors/index.cfm?ID=4 (last visited Oct. 8, 2010) ("In 1995, the IRS instructed California Cryobank to issue 1099's to all sperm donors earning $600 or more in any calendar year.")
226. Frequently Asked Questions, EGG DONOR SELECT, http://www.eggdonorselect. com/donor/faq.aspx (last visited Oct. 8, 2010) ("[Egg] [d]onors will receive a Form 1099 from Egg Donor Select.").
227. Federal Insurance Contributions Act, I.R.C. §§ 3101-3128 (2006)
228. see also Robert W. Wood, Independent Contractor vs. Employee and Blackwater, 70 MONT. L. REV. 95, 97 (2009). These burdens, coupled with the significant financial stakes involved, and increasing Congressional concern about the loss of tax revenue due to misclassification, have combined to bring recent attention to the self-employment/employee classification issue.
229. Above the line deductions are those taken from gross income to arrive at adjusted gross income.
230. See generally I.R.C. § 62 (defining adjusted gross income), DANIEL Q. POSIN & DONALD T. TOBIN, PRINCIPLES OF FEDERAL INCOME TAXATION 2 (7th ed. 2005) (discussing relationship between adjusted gross income and above the line deductions).
231. Jeffrey H. Kahn, Beyond the Little Dutch Boy: An Argument for Structural Change in Tax Deduction Classification, 80 WASH. L. REV. 1, 20-21 (2005) (discussing the differing tax treatment for the same expense when a taxpayer is an independent contractor instead of an employee). Adding insult to injury, these deductions can be lost altogether if the taxpayer is subject to the Alternative Minimum Tax.
232. For example, nurses have been held to be employees in some circumstances, but independent contractors in others. Compare Rev. Rul. 57-300, 1957-2 C.B. 632 (holding nurses were employees for federal income tax purposes), with Rev. Rul. 61-196, 1961-2 C.B. 155 (holding nurses were not employees, but independent contractors).
233. Wood, supra note 118, at 96-97 (noting that "[t]he distinction between independent contractors and employees may seem self-evident" but that "the line between employee and independent contractor is ⋯ subtle" and "[d]isputes over classification are common").
234. The IRS has made it clear that it is not necessary for the purported employer to actually direct or control the manner in which the services are to be performed, but rather that the purported employer has the right to do so. In addition, "if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is an independent contractor." Treas. Reg. § 31.3121(d)-1(c)(2)
235. Rev. Rul. 87-41, 1987-1 C.B. 298.
236. The three areas of inquiry stem from twenty common law factors, the importance of which depends on the facts of the particular case.
237. See United States v. Silk, 331 U.S. 704, 714 n.8 (1947) (listing factors)
238. Id. at 720 (Rutledge, J., concurring) (describing the "common law control test"); Independent Contractor, INTERNAL REVENUE SERVICE, http://www.irs.gov/businesses/small/article/0,,id=179115,00.html (last updated May 19, 2010) (noting the three basic areas of inquiry).
239. Avis Rent a Car System, Inc. v. United States, 503 F.2d 423, 430 (2d Cir. 1974)
240. Treas. Reg. § 31.3121(d)-1(c)(3) ("Whether the relationship of employer and employee exists under the usual common law rules will in doubtful cases be determined upon an examination of the particular facts of each case.").
241. Leavell v. Comm'r, 104 T.C. 140, 149 (1995) (noting the importance of the right to control).
242. E.g., Hodgkinson v. Comm'r, 27 T.C.M. (CCH) 865, 866 (1968) (holding that babysitter was employee where parents provided specific instructions for the care of the children)
243. See, e.g., Allaboutsurrogacy GSA, supra note 24 ("Surrogate agrees to refrain from: ⋯ [i]ngesting medicinal herbs, saccharine or other artificial sweeteners.").
244. E.g., Debele GCA, supra note 39.
245. United States v. Porter, 569 F. Supp. 2d 862, 869-70 (S.D. Iowa 2008) ("If the Services must be rendered personally, presumably the person or persons for whom the services are performed are interested in the methods used to accomplish the work as well as in the results.") (quoting Rev. Rul. 87-41, 1987-1 C.B. 296).
246. See, e.g., Surromomsonline GSC, supra note 21 ("Genetic Parents agree to pay Embryo Carrier as compensation for services provided the sum of $-. The compensation shall be paid in 10 equal monthly installments, the first being paid after the pregnancy is confirmed.")
247. Debele GCA, supra note 21 ("The [intended parents] agree to pay [surrogate] the sum of $- as and for the risks she is undertaking by becoming the gestational carrier to a child for [intended parents]. This sum shall be paid in the following installment⋯.").
248. See, e.g., Surrogacy911 GSC, supra note 23
249. Allaboutsurrogacy GSC, supra note 21
250. see also Porter, 569 F. Supp. 2d at 874 (explaining that reimbursement of expenses favors a finding of employee status).
251. Independent Contractor (Self-Employed) or Employee?, INTERNAL REVENUE SERVICE, http://www.irs.gov/businesses/small/article/0id=99921,00.html (last visited Oct. 30, 2010).
252. Id. (noting more formal relationship leans toward employee status).
253. Allaboutsurrogacy GSA, supra note 21. ("Genetic father shall pay the cost of a term life insurance policy on Surrogate's life payable to a beneficiary named by Surrogat⋯.").
254. INTERNAL REVENUE SERVICE, supra note 125.
255. Azad v. United States, 388 F.2d 74, 76 (8th Cir. 1968)
256. Matthews v. Comm'r, 92 T.C. 351, 360 (1989)
257. see also Wood, supra note 118, at 97 ("The process of attempting to classify a worker involves few bright-line tests. In large part, determining whether a worker is an employee or an independent contractor involves a subjective analysis, even though the criteria may appear objective.").
258. See Reproassistinc SSA, supra note 62 ("Surrogate specifically states that she has been engaged as an independent contractor of [Reproductive Assistance Inc.];and that at no time shall she be treated or considered as one of RAI's employees.").
259. Lisa Milot, What Are We-Laborers, Factories or Spare Parts? The Tax Treatment of the Transfer of Human Body Materials 33 (University of Georgia School of Law Legal Research Paper Series, Paper No. 09-015, 2009), available at http://ssrn.com/abstract=1480355 ("[I]n at least most instances the surrogate mother will not be an employee of the clinic or individual employing he⋯.").
260. See, e.g., Vizcaino v. Microsoft, 120 F.3d 1006, 1012 (9th Cir. 1997) (concerning a group of workers Microsoft classified contractually as "independent contractors" who sued to gain access to Microsoft's savings and stock purchase plans; in previous years, the IRS had reclassified such workers as employees, and Microsoft was required to pay withholding taxes and the employer's portion of FICA)
261. Rev. Rul. 56-440, 1982-2 C.B. 685
262. see also Wood, supra note 118, at 117-18 ("Some employers are startled to learn that a written contract with an independent contractor that clearly identifies the worker as an 'independent contractor' may not be respected by the courts.").
263. The failure to report income also leaves the surrogate without "credit" for her contributions, which can result in detrimental economic consequences when the surrogate wants to retire.
264. Mary E. Becker, Obscuring the Struggle: Sex Discrimination, Social Security, and Stone, Seidman, Sunstein & Tushnet's Constitutional Law, 89 COLUM. L. REV. 264, 277 (1989) (noting that because women live longer than men, and because "public and private income-support systems for the elderly afford much better protection for men than for women[,⋯social security is especially important for women").
265. I.R.C. § 32 (2006).
266. See Earned Income Tax Credit (EITC) Questions and Answers, INTERNAL REVENUE SERVICE, http://www.irs.gov/individuals/article/0id=96466,00.html (last updated Mar. 15, 2010). The credit is available to taxpayers whose AGI and earned income are under certain thresholds. For example, for taxpayers with two qualifying children, the threshold is $40,363 (or $45,373 for married couples filing jointly) in 2010. Rev. Proc. 2009-50 § 3.06, 2009-45 I.R.B. 617, 622.Taxpayers must also have investment income of $3100 or less for the year.
267. Id.
268. WEST'S TAX LAW DICTIONARY § 867 (2008).
269. Taxable earned income includes wages, salaries, and tips, as well as net earnings from selfemployment.
270. See What Is Earned Income, INTERNAL REVENUE SERVICE, http://www.irs.gov/ individuals/article/0id=176508,00.html (last updated Mar. 23, 2010). Not included in "earned income" are interest and dividends; pensions; social security; unemployment benefits; and alimony
271. Id.
272. Dorothy A. Brown, The Tax Treatment of Children: Separate but Unequal, 54 EMORY L.J. 755, 836 (2005) ("The phase-out range is where the taxpayer's earned income increases and the taxpayer's EITC begins to decrease and is eventually reduced to zero.").
273. Tax liability is determined as a percentage of "taxable income," which in turn is determined via "adjusted gross income." Deductions reduce adjusted gross income, and therefore reduce tax liability
274. See generally I.R.C. §§ 1, 62, 63, 67 (2006).
275. Unlike income, which is broadly construed, deductions are construed narrowly, and the burden of establishing a deduction is on the taxpayer. E.g., INDOPCO, Inc. v. Comm'r, 503 U.S. 79, 84 (1992) (noting the"'familiar rule' that 'an income tax deduction is a matter of legislative grace and that the burden of clearly showing the right to the claimed deduction is on the taxpayer.'") (quoting Interstate Transit Lines v. Comm'r, 319 U.S. 590, 593 (1943))
276. accord New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934) (noting that deductions"depend upon legislative grace" and are allowed"only as there is clear provision therefor").
277. This is because deductions for business expenses are"above the line," while deductions for personal expenses are"below the line." See I.R.C. § 62. Many deductions for personal expenses are subject to other limitations. E.g., id. § 213 (limiting deductions for medical expenses to those expenses exceeding 7.5% of AGI). Furthermore, expenses for earning income, so-called"business deductions" are generously allowed. MARVIN A. CHIRELSTEIN, FEDERAL INCOME TAXATION 104 (11th ed. 2009) (noting the"breadth and generality" of § 162(a E.g., id. § 213 (limiting deductions for medical expenses to those expenses exceeding 7.5% of AGI). Furthermore, expenses for earning income, so-called"business deductions" are generously allowed.
278. MARVIN A. CHIRELSTEIN, FEDERAL INCOME TAXATION 104 (11th ed. 2009) (noting the"breadth and generality" of § 162(a)).
279. I.R.C. § 262 (disallowing any deduction for"personal, living, or family expenses"). That rule, however, is one that is proven in spades by its exceptions. Congress has frequently chosen to cross the"business/ personal line" by expressly authorizing deductions for expenses that appear purely personal.
280. See, e.g., I.R.C. § 170(a)(1) (permitting charitable deductions)
281. §163(h)(2)(D) (permitting deductions on home mortgage interest)
282. §213(a) (permitting deductions for medical expenses).
283. I.R.C. § 162.
284. Id. § 212.
285. To claim a deduction, a taxpayer must also show that his or her expense is not capital in nature, that it is paid or incurred in the taxable year, and that the taxpayer is"carrying on" the trade or business. Those requirements are easily satisfied, and not at issue here.
286. This is so regardless of the outcome of the independent contractor/employee inquiry discussed supra notes 116-142 and accompanying text, because taxpayers can be in the trade or business of being employees. Primuth v. Comm'r, 54 T.C. 374, 377 (1970) (employees are in the trade or business of being employees). Note, however, that employees may deduct unreimbursed trade or business expenses only as miscellaneous itemized expenses. Therefore, expenses may be deducted only to the extent they exceed 2% of the taxpayer's AGI, and taxpayers who do not itemize are denied the benefit of the deduction. I.R.C. § 67.
287. Indeed, there are many ART physicians, but gestational surrogates are fewer and farther between.
288. Comm'r v. Groetzinger, 480 U.S. 23, 27 (1987). Although the Court has articulated factors, Congress has never defined"trade or business." Id. lamenting that"the Code has never contained a definition of the words 'trade or business' for general application, and no regulation has been issued expounding its meaning for all purposes")
289. Id. at 36 (noting that resolution of the"trade or business" inquiry"requires an examination of the facts in each case") (citing Higgins v. Comm'r, 312 U.S. 212, 217 (1941)).
290. Id. (holding that taxpayer who wagered on dog racing was involved in a trade or business, not a mere hobby).
291. Id. at 30.
292. Green v. Comm'r, 74 T.C. 1229, 1235 (1980) (holding taxpayer to be in the trade or business of selling plasma, and reasoning that her"daily attention to her special diet" and frequent trips to the extracting laboratory supported that finding).
293. Nickerson v. Comm'r, 700 F.2d 402, 407 (7th Cir. 1983) (noting that taxpayer's primary goal in owning dairy farm was profit, and reasoning that"petitioner may have chosen farming over some other career because of fond memories of his youth does not preclude a bona fide profit motive"). Much of the skepticism of business expenses stems from individuals attempting to subsidize sporting or recreational activities by disingenuously claiming the expenses as business expenses.
294. See, e.g., Imbesi v. Comm'r, 361 F.2d 640, 645 (3d Cir. 1966) ("Where the activity is ⋯of a sporting or recreational nature, then indeed, if he incurs losses in it, the question of motive becomes acute. The taxpayer is required to demonstrate that the appearance of a pleasureseeking motive is misleading and that instead the motive for the activity was profit making.").
295. Snyder v. United States, 674 F.2d 1359, 1363 (10th Cir. 1982) (citing Wiles v. United States, 312 F.2d 574, 576 (10th Cir. 1962)).
296. See Comm'r v. Groetzinger, 480 U.S. 23, 35-36 (1987)
297. see also Snyder, 674 F.2d at 1364-65 (remanding for additional fact-finding on taxpayer's primary motivation).
298. Wesley v. Comm'r, 93 T.C.M. (CCH) 1062, 1063 (2007) (citations omitted).
299. Ciccarelli & Beckman, supra note 29, at 30
300. Edelmann, supra note 31, at 128
301. Kanefield, supra note 29, at 10. Though surrogates also note that they plan to"put the money to good use."
302. Id.
303. Hal V. Levine, Gestational Surrogacy: Nature and Culture in Kinship, 42 ETHNOLOGY 173, 181-82 (2003) ("The emphasis on the gift of life allows surrogates to transcend the base notion that they are prostituting their maternity.").
304. Drabiak et al., supra note 17, at 305 ("Unlike other circumstances of professional recognition where value of the profession is measured by currency and regulated by market functions, categorization of surrogacy as altruistic ⋯may reduce surrogates' ability to negotiate their terms, since open disclosure of financial motivations may be viewed as socially unacceptable.").
305. Groetzinger, 480 U.S. at 36.
306. Drabiak et al., supra note 5, at 303-04 ("Despite the fact that nearly all commercial surrogacy arrangements involved compensation, studies in which surrogates have been asked about their motivations find that most reject money as motivation for their participation. Even if financial motivation is a factor, only a handful of women mention money as their primary motivation for entering into an agreement." (internal citations omitted)).
307. Kanefield, supra note 29. When agencies have attempted to recruit unpaid surrogates, they have failed. Noel Keane was reportedly the first person to offer payment for gestational surrogacy. Keane, a Michigan attorney, learned that state law prohibited baby selling. Keane stopped offering payment"offering potential surrogates the chance to give the gift of life without any financial compensation." Under this business model, Keane was unable to attract enough surrogates to meet the demand. Keane moved his business to Florida.
308. SPAR, supra note 52, at 75-76.
309. I.R.C. § 212 (2006).
310. Id.
311. In Higgins v. Commissioner, 312 U.S. 212 (1941), the Supreme Court held that salaries and other expenses incident to looking after one's own investments in bonds and stocks were not deductible as expenses paid or incurred in carrying on a trade or business. Congress responded to Higgins by adding Section 212, which permits deductions for the ordinary and necessary expenses paid or incurred for the production or collection of income. 68A Stat. 69 (codified as amended at I.R.C. § 212 (2006)). E.g., Cameron v. Comm'r, 94 T.C.M. (CCH) 245, 247 (2007) (noting that for a"taxpayer to be a trader, the trading activity must be substantial, which means frequent, regular, and continuous enough to constitute a trade or business as opposed to sporadic trading") (internal citations omitted).
312. I.R.C. § § 62 (providing that only trade or business expenses are above the line), 67 (imposing 2% limit).
313. This distinction between sections 162 and 212 has been criticized as largely a historical anomaly that produces illogical results.
314. See F. Ladson Boyle, What Is a Trade or Business?, 39 TAX LAW. 737, 739 (1986) (noting"illogical results" and providing examples of inconsistencies, such as a consultant"who actually performs no services has been held to be in a trade or business [but] a nonprofessional fiduciary has been held not to be engaged in a trade or business" and"a passive real estate owner is generally in a trade or business, but not a securities investor who has extensive holdings that require full-time attention, including offices and staff" (internal citations omitted)).
315. I.R.C. § § 162, 212.
316. Robert B. Lachenauer, Note, Campbell v. Commissioner: The Availability of Business Expense or Loss Deductions for Insured Contingencies, 30 WM. & MARY L. REV. 433, 450 (1989) ("Deference to business judgment is one of the policies underlying section 162." (citing Welch v. Helvering, 290 U.S. 111, 113 (1933))).
317. Deputy v. DuPont, 308 U.S. 488, 495 (1940) ("Ordinary has the connotation of normal, usual, or customary.").
318. Commentators have criticized the potential problems of focusing too narrowly on the frequency of a particular expense in a particular industry. Such an approach has potential to stifle business creativity.
319. BORIS I. BITTKER, FEDERAL TAXATION OF INCOME, ESTATES, AND GIFTS ¶ 20.3.2, at 20-47 (1981)("There is no sound reason to deny a deduction merely because the taxpayer is unusually imaginative or innovative ⋯.").
320. The"ordinary" requirement is also used to deny deductions for expenditures that must be capitalized. As a rule, expenditures that provide a benefit beyond the current taxable year must be capitalized, rather than deducted currently.
321. See I.R.C. § 263
322. Gregg D. Polsky & Brant J. Hellwig, A Tax Question Teed Up by Tiger, 126 TAX NOTES 863, 865 (2010) (noting that there is no universally accepted understanding of the"ordinary" condition, but the"best interpretation ⋯found that the purpose of the term 'ordinary' is to distinguish between payments that give rise to an immediate deduction and payments that constitute capital expenditures") (internal citation omitted)). Presumably, some maternity clothing might last beyond one year, and might be subject to capitalization. The IRS, however, does not seem to require capitalization in those instances when work-related clothing has been addressed, regardless of whether the clothing item would last longer than a year.
323. A.J. Cook, Clothes Can Be Tax-Deductible, but at the Discretion of the IRS, MEMPHIS BUS. J., Nov. 19, 2004, http://www.bizjournals.com/memphis/stories/ 2004/11/22/smallb3.html (discussing permitted current deductions for clothing such as nurses' uniforms). A highly conservative approach might be to provide in the surrogacy contract that the intended parents will reimburse the surrogate for up to a set dollar amount of maternity clothing, which would then be delivered to the parents after the pregnancy.
324. I.R.C. § 262 (disallowing deduction of personal expenses). But see, e.g., I.R.C. § § 213 (medical expenses), 163(h) (home mortgage interest)
325. I.R.C. § 213(a), (d) (permitting a deduction for expenses paid"for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body"). The deduction provided in § 213 is sometimes referred to as a deduction for"extraordinary" medical expenses, because only those expenses that exceed 7.5% of the taxpayer's adjusted gross income are permitted to be deducted. For example, if a taxpayer's adjusted gross income is $100,000, and the taxpayer has $15,000 in unreimbursed medical expenses, the taxpayer may deduct only $7500, which is the amount her medical expenses exceeded 7.5% of her AGI (here, 7.5% of $100,000 is $7500).
326. The primary purpose test, first articulated in Rassenfoss v. Commissioner, 158 F.2d 764, 767 (7th Cir. 1946), is one of four tests used in the business/personal distinction.
327. See BITTKER & LOKKEN, FEDERAL TAXATION OF INCOME, ESTATES AND GIFTS ¶20.2.1 (1999 & Supp. 2010) (noting that"the IRS, the courts, and Congress have vacillated between four main approaches" in"deciding whether to allow expenses along the business-personal borderline"). Another approach is simply to label a particular expense"inherently personal" and disallow the deduction. Yet another approach is illustrated by the historical treatment of the cost of meals and lodging incurred by taxpayers on business trips; it is to permit the deduction of the expenses, but only"if, and to the extent that the expense was increased by the exigencies of the taxpayer's business."
328. Id. The allocation approach is used, for example, in permitting deductions for home offices, and for certain"listed property." I.R.C. § § 280A, 280F.
329. Tsilly Dagan, Commuting, 26 VA. TAX REV. 185, 188 (2006) (criticizing the current business/personal analysis generally and in particular the federal income tax treatment of commuting expenses).
330. E.g., Pevsner v. Comm'r, 628 F.2d 467, 469 (5th Cir. 1980) (denying deduction for Yves St. Laurent-brand merchandise to manager of an elegant women's clothing store and noting"[t]he generally accepted rule governing the deductibility of clothing expenses is that the cost of clothing is deductible as a business expense only if: (1) the clothing is of a type specifically required as a condition of employment, (2) it is not adaptable to general usage as ordinary clothing, and (3) it is not so worn." (citing Donnelly v. Comm'r, 262 F.2d 411, 412 (2d Cir. 1959))).
331. Id.
332. E.g., Vance M. Forrester, Deducting Employee Business Expenses, 132 MIL. L. REV. 289, 303-04 (1991) (explaining when military service members can deduct the costs of uniforms; in particular,"[a]ctive duty members may deduct the cost and maintenance of military fatigue uniforms if the uniform is required to be worn as part of military duties, and if military regulations prohibit the wearing of the fatigue uniform except while on duty or while traveling to and from work").
333. We limit this discussion to the costs of care leading up to pregnancy, because once pregnancy is achieved, insurance almost always covers medical expenses.
334. Assuming an average of three IVF cycles per successful implantation, pre-pregnancy medical expenses can top $50,000 because the costs include not just the IVF, but also hormone injections for the surrogate.
335. Jim Hawkins, Financing Fertility, 47 HARV. J. ON LEGIS. 115, 115-16 (2010) (noting a single round of IVF costs over $12,000).
336. There is no binding guidance, but the IRS considers the costs of"Fertility Enhancement" deductible.
337. See INTERNAL REVENUE SERV., PUB. 502, MEDICAL AND DENTAL EXPENSES 6 (2009) (providing that taxpayers may include in"medical expenses""the cost of the following procedures to overcome an inability to have children," including"[p]rocedures such as in vitro fertilization (including temporary storage of eggs or sperm)").
338. I.R.S. Priv. Ltr. Rul. 2003-18017 (allowing deduction of numerous expenses incurred by an infertile couple using an egg donor). Recently, another taxpayer was unsuccessful in deducting surrogacy related expenses. Magdalin v. Comm'r, 96 T.C.M. (CCH) 491, 493 (2008) (disallowing deduction of surrogacy related expenses to a single, gay male taxpayer because none of the expenses were incurred due to a"medical condition or defect ⋯that required treatment or mitigation through IVF procedures").
339. This proper treatment of the medical expenses yields a tax advantage, because the 7.5% threshold does not apply to § 162 deductions.
340. A standard canon of construction is that the specific trumps the general. Varity Corp. v. Howe, 516 U.S. 489, 511 (1996) (acknowledging the canon that"the specific governs over the general" but warning that"[t]o apply a canon properly one must understand its rationale &uot;).
341. There is scant evidence as to congressional intent for the medical expense deduction.
342. See, e.g., James W. Colliton, The Medical Expense Deduction, 34 WAYNE L. REV. 1307, 1307 (1988) (noting that"confusion surrounds the nature of the deduction and its basic purposes").
343. I.R.C. § 274 (imposing additional requirements on the basic requirements of § 162 for travel and entertainment expenses such as limiting the otherwise allowable deduction for meals and entertainment to 50% of the cost).
344. Richard C.E. Beck, Deductibility of Treble Damages Paid for Breach of National Health Service Corps Scholarship Contracts: The Misuse of IRC 265(a)(1) in Stroud v. United States and of the Origin of the Claim Test in Keane v. Commissioner, 1 CHARLESTON L. REV. 1, 24 (2006).
345. The Supreme Court applied the test, for example, when the owner of a General Motors dealership unsuccessfully attempted to deduct part of the cost of his divorce by arguing that if he had lost the divorce, he would have lost his dealership. United States v. Gilmore, 372 U.S. 39, 44 (1963) (discussing the"origin of the claim" test:"Congress has seen fit to regard an individual as having two personalities [for income tax purposes]: 'one is [as] a seeker after profit who can deduct the expenses incurred in that search; the other is [as] a creature satisfying his needs as a human and those of his family but who cannot deduct such consumption and related expenditures.'" (quoting SURREY & WARREN, CASES ON FEDERAL INCOME TAXATION 272 (1960))).
346. Keith E. Engel, Deducting Interest on Federal Income Tax Underpayments: A Roadmap Through a 50-Year Quagmire, 16 VA. TAX REV. 237, 276 (1996) (noting that the Tax Court recognizes the deductibility of state income taxes under Section 162). This rule is long-standing.
347. See Note, Accrual of Tax Deficiencies and Recoveries, 58 COLUM. L. REV. 372, 372 n.7 (1958) (noting that taxpayers may deduct real estate and other taxes under § 162 to the extent that they are trade or business expenses, or may use § 212 if the expenses are incurred in the production of income).
348. Each surrogate has a unique relationship with the intended parent. For this reason, in some instances the surrogate will not have income if, for example, the surrogate is the relative or close friend of the intended parents.