I wanted to again thank our guest bloggers, commenters, and readers of last week’s Taxing Eggs mini-symposium and collect the links to all of the posts in one place for easy reference (see below). In wrapping up, I also wanted to move away from the specific tax questions we’ve been debating, and address some larger issues raised by the case.
As my colleague Larry Zelenak says in his post, “It is striking that, despite one hundred years of development of federal income tax doctrine, and despite the fact that sales/donations of eggs, sperm, blood, hair, etc., are far from rare, we still don’t have clear answers to these questions.” Perez v. Commissioner, then, may illustrate yet another of the ways in which our discomfort with these transactions involving the body impedes a rational development of the law governing them.
I have previously argued, for example, that our failure to fully recognize egg “donation” as the robust commercial industry that it is harms donors and intended parents alike. Does this same failure account for IRS willingness to accept the “pain and suffering” story from egg donors who have been 1099’d, despite our tax experts’ consensus that exclusion from income based on pain and suffering is not even a plausible, much less correct, tax treatment? If so, then Perez may represent the flipside of the problem I have complained about: rather than harming egg donors and fertility customers, the tax system has been subsidizing third party reproduction through a failure to tax egg donor payments like the ordinary income or sale that it is.
Another notable aspect of egg donation brought to light by Perez v. Commissioner is the extent to which at least some egg donors are aggressively (and successfully) managing their income tax liability for income earned through egg donation. Perez herself – a five-time egg donor -- followed advice provided by other egg donors on the internet to successfully challenge previous IRS notices. I discussed in my introductory post the savvy advice provided by “Elizabeth,” an eight-time egg donor, on how to avoid tax liability for egg donor payments, including consulting with the lawyers who draft the contracts, citing the appropriate IRC provisions, and policing the contract language to ensure that “your contract clearly outlines the facts that you are being compensated for physical injury, in consideration of future medical complications, and emotional suffering in addition to any economic losses endured.” Comments to Elizabeth’s post suggest that other egg donors are seeking out such guidance and following the advice to proactively manage their tax liability on income earned from egg donation.
It is, of course, possible that these cases are not representative of most egg donors, but these examples are surely inconsistent with many commonly held views of egg donors as poor, exploited, coerced, and the newest form of trafficked humans. Indeed, the trial transcript depicts Perez as an intelligent, informed woman, more than capable of weighing the benefits of commercial egg donation against the risks.
None of this is meant to suggest that we should not worry about the safety of egg donation and take steps to ensure that egg donors have been properly informed of and understand the risks involved. But it does suggest – at least to me -- that we need to carefully examine the source of our assumptions about the capacity and competence of egg donors. Are those concerns based on the actual characteristics of egg donors, or on the mere fact that egg donation is a risky job performed only by young females?
Taxing Eggs Mini-Symposium – The Complete Set
Taxing Eggs: Introduction to Perez v. Commissioner
Taxing Eggs: Lawrence A. Zelenak
Taxing Eggs: Bridget Crawford and Crawford, Part II
Taxing Eggs: What Have We Learned?
Taxing Eggs: Bridget Crawford III
Taxing Eggs: Lisa Milot Responds
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