Question

Andrew and Anya Green have been married for eight years. They have tried unsuccessfully to conceive children. In March of 2017, they sought medical assistance by visiting an in vitro fertilization clinic. With the use of fertility drugs, after several attempts, Anya became pregnant. Unfortunately, three months into her pregnancy, she suffered a miscarriage. That event led Andrew and Anya to abandon their efforts to have a biological family. They have recently decided to pursue adoption to start a family.

The cost of the in vitro fertilization treatments incurred in 2017 exceeded $45,000. Their insurance company covered twenty percent, which left them out of pocket for the balance of $36,000. Their 2016 adjusted gross income was $475,000. Andrew prepared their 2017 joint income tax return and claimed the $36,000 cost as a medical deduction. They also claimed $10,000 of medical insurance premiums as a medical deduction on this return.

Instructions:

Identify the relevant facts to determine a method to research the area of in vitro fertilization as a deductible medical expense. Determine if the Green’s deduction was correct.

Prepare a memo for the tax file (using the FIRAC method

Answer 1

medical expenses are deductible to the extent they exceed 10 percent of your adjusted gross income unless you or your spouse is older than 65.

Then the threshold is 7.5 percent of your adjusted gross income.

Note: that to claim the medical expenses, you must be itemizing your deductions rather than taking the standard deduction.

Deduction Allowable = $475000*10/100=$47500

Deduction Taken =$36000+$10000=$46000

Deduction taken is within the limits of deduction allowable, hence Green's deduction was correct.

• Memo for the Tax file using FIRAC Method

Facts:  Andrew and Anya Green have been married for eight years. They have tried unsuccessfully to conceive children. In March of 2017, they sought medical assistance by visiting an in vitro fertilization clinic. With the use of fertility drugs, after several attempts, Anya became pregnant. Unfortunately, three months into her pregnancy, she suffered a miscarriage. That event led Andrew and Anya to abandon their efforts to have a biological family. They have recently decided to pursue adoption to start a family.

Issue: tried unsuccessfully to conceive children.

Rule: Vitro fertilization clinic and to use fertility drugs

Analysis: With the use of fertility drugs, after several attempts, Anya became pregnant. Unfortunately, three months into her pregnancy, she suffered a miscarriage.

Conclusion: The cost of the in vitro fertilization treatments incurred in 2017 exceeded $45,000. Their insurance company covered twenty per cent, which left them out of pocket for the balance of $36,000.

Andrew prepared their 2017 joint income tax return and claimed the $36,000 cost as a medical deduction. They also claimed $10,000 of medical insurance premiums as a medical deduction on this return.