A California woman does owe taxes on payments she received for donating eggs, the U.S. Tax Court ruled on Thursday.
{mosads}In its ruling, the court said that the $20,000 that Nichelle Perez received from a company called the Donor Source was income — not damages for pain and suffering, which aren’t taxable.
Under Perez’s contract with the company, she was compensated for her “time, effort, inconvenience, pain, and suffering,” and would have received that money whether she produced usable eggs or not. Perez donated eggs twice, receiving $10,000 each time.
But the tax court ruled that Perez’s payment was income, essentially because she voluntarily agreed to the pain and suffering that came with donating eggs. Perez had not reported the $20,000 on her return for 2009, despite getting a tax form from the Donor Source, and the IRS later sought her out for payment.
Judge Mark Holmes of U.S. Tax Court said he had no doubt that donating eggs was painful for Perez. But he insisted that to rule that her payment was damages would have opened the door for boxers, football and hockey players, miners, farmers and ranchers to argue that they didn’t owe taxes on their incomes because of injuries suffered on the job.
“We don’t doubt that some portion of the compensation paid all these people reflects the risk that they will feel pain and suffering, but it’s a risk of pain and suffering that they agree to before they begin their work,” Holmes wrote. “And that makes it taxable compensation and not excludable damages.”
Perez said the donation process gave her cramps, bloating, headaches, nausea and fatigue. In the weeks leading up to her donation, Perez underwent internal ultrasounds, frequently gave blood and had to give herself more than 20 hormonal injections in the stomach.
Two days before her donation, Perez had to give herself a final injection with a two-inch needle in her lower hip. The surgery to retrieve the eggs, which recovered between 15 and 20, was also invasive and required anesthesia.