Even though the series of medical procedures used for the retrieval of eggs is often painful and dangerous to a woman’s present and future health, payment to an egg donor must be counted as taxable income (rather than as damages or a settlement) — because the procedures are voluntary.
BloombergBusiness recently reported on a case decided by the U.S. Tax Court which ruled that a California woman attempted to avoid taxes on $20,000 she received when she donated her eggs for use by infertile couples. Although the woman claimed the money should be treated as a settlement instead of earnings, the court disagreed, saying the voluntary procedure falls into the same category as blood donations.
What clouded the issue was that the payments Perez received weren’t explicitly for the sale of her eggs, and she was paid regardless of whether she produced viable eggs. For this reason, that means that for tax purposes, eggs aren’t considered property in a donor situation. The court didn’t address whether the eggs were capital assets and whether they qualified for lower rates available for long-term capital gains. Lisa Milot, an associate law professor at the University of Georgia in Athens, says that donors could try that approach to reduce the amount owed on egg donor payments.