The U.S. Tax Court issued its decision in Perez.
This post is intended as an update to two of our most popular posts, “How a High-demand 8x Egg Donor Appealed her Taxes and Won”
Tax law will soon be clearer on how compensation from our egg donations will be treated for tax purposes in the United States. Throughout these last few months, We Are Egg Donors has fielded dozens of emails from U.S. donors regarding the appeal process. Our Forum has been a-buzz with donors discussing how they were advised by their individual accountants. Soon, the mystery surrounding unwelcome 1099s will be clarified, if not disappear.
Why? An egg donor, Nichelle Perez, has appealed her taxes owed — and her case is now in court.
What You Need to Know:
Nichelle Perez, an egg donor out of California, donated twice. Many of us can relate to her story. She did not report her compensation as income when filing her taxes. However, her agency reported the amounts to the IRS who subsequently requested Ms. Perez pay taxes on the compensation. Ms. Perez appealed, just as many donors before her. This time the appeal led to a landmark case before the United States Tax Court – the first case addressing the tax treatment of compensation received for the sale or donation of human eggs. Ms. Perez was represented by San Diego tax attorney Richard Carpenter who kindly provided the following statement on Ms. Perez’s case to We Are Egg Donors:
The Perez trial was held before Judge Holmes of the U.S. Tax Court in San Diego on Jan 8, 2014. It is Ms. Perez’s position that the payment she received in 2009 for donating her eggs is exempt from taxation under Section 104 of the Internal Revenue Code. This IRC section provides an exclusion from gross income for payments received for personal injuries. It is the IRS’ position that the payments Ms. Perez received is ordinary income to her.
Ms. Perez felt it was necessary to challenge the IRS in Tax Court because the written contract that she had with the Donor Source organization in California, and with the birth parents, clearly indicated that she was not selling her eggs; but instead was donating them. This written contract also specifically stated that the payment Ms. Perez received was solely for her time, efforts, inconvenience, pain and suffering.
Ms. Perez’s Opening Written Post Trial Brief was due to the Court by March 10th. Up next, the IRS’ Answering Post Trial Brief is due on May 9th. All amicus briefs are also due by May 9th. Then, Ms. Perez’ Reply Post Trial Brief is due to the Court by May 27th.
Mr. Carpenter expects the written Decision by the Court by the end of the year. The Decision will provide clarity to the unsettled tax law surrounding the tax implications for the money we receive as part of our donation.
How You Can Take Action:
Donors can get involved and assist the court in their decision! Judge Holmes solicited amicus briefs addressing the appropriate tax treatment flowing from the facts of the case. Donors wishing to contribute to an amicus brief on behalf of donors or provide their insight, may reach out to Sierra at firstname.lastname@example.org.
This communication does not create the attorney-client relationship. This communication constitutes general legal advice and information directed to the public at large. Consult an attorney regarding the facts specific to your case in your jurisdiction.