Taxing Eggs
Thirty years ago I wrote an article on human capital and federal income taxation. [Ed. Note: “Federal Income Taxation and Human Capital," 70 Va. L. Rev. 1357 (1984)] One of the claims advanced by the article is that the conceptual tools that the human capital concept gives us can help in the interpreting of problems raised by the application of the Code to novel fact patterns, including the sale of body parts. The article is old, but I think it still has something to say about the taxation of egg donation.
A case kicking around back them was United States v. Garber, a criminal prosecution of a woman who had failed to declare as income the substantial sums received for the extraction of an extremely rare and valuable enzyme from her blood plasma. The courts overturned her conviction on procedural grounds (improper exclusion of experts), but the majority of an en banc Fifth Circuit speculated both that bodily parts could be considered property and might have a tax basis equal to market value. Were this true, Ms. Garber would have had no gain, and thus no taxable income. My article was agnostic on the question of body-parts-as-property, but argued that the human-capital concept suggests reasons why a zero basis would be more appropriate in these transactions.