Taxing Eggs: Bridget Crawford

I've spent some time with the transcript in the Perez v. Commissioner case.  As tax trials go, this case does not seem particularly complicated.  The parties have stipulated to almost all of the relevant facts.  The parties called just two individuals as witnesses: the taxpayer herself and the COO of the fertility clinic.  Their testimony was, from what I can tell, largely as expected.  The taxpayer emphasized the physical "pain and suffering" associated with taking the medicines in connection with her egg extraction. The clinic COO explained the process by which the taxpayer was compensated. 

Of note was the COO's testimony that the fertility clinic's payments are not based on either the amount of subjective pain that the egg provider reports or the time that she spends in connection with activities related to the egg provision.  The egg provider is paid a lump sum, but that amount will be reduced if no eggs are retrieved.  It is conceivable, for example, that a woman might take all of the medicines required to stimulate the production of eggs, but that the fertility doctor or the egg provider would choose not to proceed to the retrieval phase.  In that case, the lump sum is reduced.  In other words, receiving full payment depends on whether an egg is actually retrieved.

In this light, I was surprised at the comments made by Tax Court Judge Mark V. Holmes, in addressing counsel after the conclusion of the trial portion of the case.  According to the transcript, Judge Holmes said:

Okay.  We're done with this trial portion of the case, then.  Now, this is interesting.  I had initially thought, as you know, at calendar call that this might be a sale of body parts.  Unless I'm missing something, it's not.  So you can ignore my request that you brief that, unless you think it is a sale of body parts case for some reason.

If a woman receives one amount for taking the medicines in preparation for egg provision, and then an additional amount if eggs are retrieved, then at least this additional amount must be for the sale of the egg itself.  Thus, I think this is a "sale of body parts" case indeed.

Comments

[Professor Julie Shapiro]

I think this payment structure (less money if no eggs) is somewhat unusual in the industry. At the very least I don't think it comports with the recommended standard.

My understanding (which may be imperfect) is that people (egg donors and sperm donors) get the money whether or not they produce usable gametes as long as they follow the protocols. This is consistent with characterizing the money as being for pain, etc. rather than for the gametes themselves.

See http://www.asrm.org/uploadedFiles/ASRM_Content/News_and_Publications/Ethics_Committee_Reports_and_Statements/financial_incentives.pdf

There are still, of course, serious issues of commodification here--among other things I think the eggs/sperm are sometimes (perhaps even often) purchased by those who will be using them. Some of the issues are discussed here, though it's a couple of years old and has nothing to do with taxes. http://julieshapiro.wordpress.com/2012/09/10/another-look-at-the-egg-market/

[Professor Julie Shapiro]

One other thought, more responsive to your point. Perhaps the idea is that if no retrieval process is done, then the pain and suffering is less and hence, compensation diminished. The question is what would happen if they did the retrieval but, for whatever reasons, ended up with no eggs.

[Darren Rosenblum]

Bridget's comments really probe the complexities of what is the taxable event here. I agree with Julie that this is not necessarily the standard structure, but we really have little reason to know what the standard structure actually is.

Perhaps it's my Contracts prof side, but it seems to me that the taxable event relies on whatever the purpose of the contract is. Contracts may have multiple purposes of course, as some of the others have suggested, but it's hard to tease out what value is assigned to what aspect of the exchange. Food for thought, Contracts profs!

[Professor Julie Shapiro]

I've done a little bit more research on this--consulted with a number of lawyers who do contracts involving egg donors. It seems to me fairly clear that the deals are structured so that women are not offered money for their eggs per se.

It's common for the payments are staged--some amount at signing, some amount when she begins taking drugs and some about when the retrieval procedure is done. Under that system if the retrieval procedure isn't done, then that last payment isn't made. I think that's probably what the witness was trying to explain.

All the lawyers I communicated with said that if the procedure is done, full payment is owed even if no usable eggs are retrieved.