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One-Man Sperm Bank Can't Deduct 'Donations'

The irony. Just as the summer blockbuster The Kids Are All Right draws attention to the complex role of sperm donors, a federal tax court strikes down one prolific donor's attempt to get tax benefits for his sperm bank.

Here's the full and (I must add) true story.

For the past six years, a California sperm bank called Free Fertility Foundation has been in a tax dispute with the Internal Revenue Service, because the IRS turned down the foundation's application for non-profit status. Free Fertility provides free vials of sperm to mothers with fertility problems. "Sperm vials available immediately with no wait," the company's web site boasts.

When not donated for free, vials of sperm apparently can be costly, depriving those who are both income and fertility challenged with the opportunity to become parents. Free Fertility claims that providing sperm for free serves a public health interest and thus should qualify the group as a charitable foundation. (That would give the organization the ability to take in money on a tax-free basis, pay potential donors and other employees and buy supplies.) Normally, an operation of this type could qualify as a tax-favored charity, according to the tax court that heard the case. But not this time.

What's the problem? Click on Free Fertility's "sperm donor catalog" and you find that the prospective charity's sperm donor list is, well, limited. Very limited. In fact, there's just one entry -- donor #fwcn02453.

Coincidentally, donor #fwcn02453 is also the foundation's founder and one of it's two directors. (The other director is the donor's dad.)

On the bright side, if you're a prospective parent looking for information, there's seemingly no end to the detailed personal history -- and copious photographs -- provided about the potential father of your child.

Sure, the site gives the standard sperm donor description: "scientific researcher; mathematics and computer expert; vice-president of company; straight A student in university; chess champion in high school; awards for academic excellence and athletics"
But there's more.

You're probably wondering about those awards for academic excellence, right? They're extensive and include a 2nd place finish in his 3rd-grade Science Fair, as well as a 2nd-place finish in the 5th-grade spelling bee, according to the web site. In 9th grade, the donor won first place in his high school chess tournament.

Athletic accomplishments? 2nd-place finish in a college butterfly swimming competition (there's a photo of him doing the butterfly at age 15) and 3rd-place in a 100-yard freestyle competition. In high school, he won a push-up competition by doing 85 push-ups in one minute. (Get those applications in early, this sperm's going fast.)

But the tax court felt a sperm bank should bank the sperm of more than one donor.

There also was a problem with Free Fertility's screening process, which determined what lucky women would receive donor #fwcn02453's seed. In the two years that the tax court considered, Free Fertility received more than 800 applications from women willing to fill out the group's questionnaire. But Free Fertility only distributed sperm to 24 recipients. Free Fertility fed information from these questionnaire's into a computer program, which gave each potential recipient a "score" but the donor and his dad could decide to "override" the score. The tax court found the foundation's criteria somewhat "arbitrary."

"Simply put," the tax court ruled earlier this month, Free Fertility's activities may "promote the propagation of [one man's] seed and population growth, but they do not promote health for the benefit of the community."

Regrettably, donor #fwcn02453 failed to respond to my request for comment.

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