Perez v. Commissioner

144 T.C. 51 (2015)

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Nature of the Case

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Facts

P learned about egg donation and discovered Donor Source International, LLC--an egg-donation agency in Orange County that matches egg donors with women and couples struggling to conceive on their own. This is all called egg 'donation,' but the term is a misnomer--the participant in the egg-stimulation and retrieval is compensated. The Donor Source fixes the fee for first-time egg donors based on where the donor lives. For Southern California women, first-time donors are promised $5,500--and the price goes up with each subsequent donation. The Donor Source is registered with the American Society for Reproductive Medicine, which caps the compensation for egg donors at $5,000 to $10,000. The Donor Source also promises to reimburse its suppliers for their expenses in traveling to and from their medical appointments. The agreement to donate is memorialized by contract. The contract plainly provides that it is not for the sale of body parts and compensation is for the Donor's time, effort, inconvenience, pain, and suffering in donating her eggs. The donor assumes 'all medical risks and agrees to hold The Donor Source harmless from any and all liability for any and all physical or medical harm to herself * * *.' Thus, P's payment was 'in consideration for all of her pain, suffering, time, inconvenience, and efforts.' The Agreement does not instruct any of the Parties on the issue of taxation of any payment made or received pursuant to this Agreement or to any agreement with The Donor Source. P was to follow a detailed and strict protocol and underwent a series of intrusive physical examinations. She frequently had to travel to a fertility clinic, submit to pregnancy tests, endure invasive internal ultrasound examinations, and have a syringe stuck into her arm to draw four to five vials of blood. P had to self-administer hormonal injections using a one-inch needle. P had to take the shots right into her stomach, which often bruised and hurt her. With complete credibility P said that these procedures were 'actually very painful * * * it was burning the entire time you were injecting it.' On the retrieval date, P was required to undergo anesthesia for the procedure. Doctors were able to retrieve between 15 and 20 eggs--rather than the body's normal production of just one--from her. After it was over, P felt cramped and bloated; she had mood swings, headaches, nausea, and fatigue. P got a check for $10,000. P did it again for another $10,000. P concluded that the money was not taxable because it compensated her only for pain and suffering; therefore, she left it off her tax return. D noticed a deficiency, and P filed a petition.