Free Fertility Foundation v. Com 135 TC 2
This was originally published on PAOO on July 15th, 2010.
I had originally thought of calling this "You Can't Make This Stuff Up", but I figured I'll get in enough trouble without quoting Don Imus. Free Fertility Foundation v. Com 135 TC 2 sounds like something you might read in Onion, but it is a genuine tax court decision. I had noted its precursor back when I was not tax blogging and might have got around to it. PLR 200736307 and related PLR 200737044 revoked the exempt status of a nameless organization whose charitable purpose was the provision of donated sperm to worthy women. The IRS (they don't say how) determined that 88% of said sperm, if you will excuse the expression, came from the same donor, who along with his father founded and ran the organization, The canned language of one of the rulings invites the organizers to apply to the Tax Court for declaratory judgment. Apparently they did.
So we are able to get details. Failure to obtain exempt status has not put the foundation under. You can get all the details on http://www.freedonr.com/. The donor catalog (which has one entry) has extensive information on the intellectual achievements of the donor including for example :
4th grade: 3rd place in school science fair with science project entitled "Using Red Cabbage Juice to Determine Acidity".
I guess that is something that a prospective mom would want to know about.
At any rate the tax court went along with the IRS on this one. It boils down to his exempt purpose not benefiting a broad enough class of people. The petitioner claimed it was a very broad class indeed namely all women in the world capable of bearing children. The tax court thought the class somewhat more limited - namely women who want to bear his children. In prefacing their decision they did however make the following observation :
"The free provision of sperm may, under appropriate circumstances, be a charitable activity."