Damn It Jim, I'm A Tax Lawyer Not An Actor

It has been reported that William Shatner has sold a kidney stone to an on-line gambling casino, GoldenPalace.com, for $25,000, with the proceeds to go to a charity, Habitat for Humanity. Of course, the question that immediately comes to everyone's mind (?) is "What are the tax implications?"

Presumably, Shatner either deeded the actual stone to the charity or entered into an agreement with the casino that it would sell the stone and pay all proceeds to the charity. Thus, Shatner will not take any amount of the proceeds into income.

Arguably, he may be entitled to a small charitable tax deduction for the stone. The net amount of any charitable deduction for "self-created" property (I think we all can agree that the stone qualifies as "self-created") is measured by reducing the value of the item (i.e., $25,000) by the amount of ordinary income that the donor would have taken into account if he sold the valuable stone. One might think that this would mean that there is no charitable deduction since the entire amount that Shatner would have received if he had sold the stone would be subject to taxation at ordinary rates. However, this ignores the basis issue. If Shatner paid out of his own pocket for the medical care necessary to "produce" the stone, that amount would conceivably be deductible.

This, of course, is a detour. Tomorrow, back to real tax and business issues. In other words, all things must pass.