Perez v. Commissioner
United States Tax Court
P received large sums of money in exchange for undergoing procedures to donate her eggs to infertile couples. Under P's contracts, the sums she received were designated compensation for pain and suffering. ¶ did not report these amounts on her 2009 tax return. R issued a notice of deficiency.
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P received large sums of money in exchange for undergoing procedures to donate her eggs to infertile couples. Under P's contracts, the sums she received were designated compensation for pain and suffering. ¶ did not report these amounts on her 2009 tax return. R issued a notice of deficiency. Held: Compensation for pain and suffering resulting from the consensual performance of a service contract is not "damages" under I.R.C. section 104(a)(2) and must be included in gross income.
1Opinion of the Court
HOLMES, Judge:
Nichelle Perez received $20,000 under contracts that she signed with a clinic before she underwent a prolonged series of painful injections and operations to retrieve her unfertilized eggs for transfer to infertile couples. The contracts said that she was being paid in compensation for her pain and suffering. The Code says that damages for pain and suffering are not taxable.
Was the $20,000 Perez received “damages”?
FINDINGS OF FACT
Perez is a 29-year-old single woman from Orange County, California. She is a high-school graduate and worked as a full-time sales associate for Sprint.…
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