Craigslist ads: looking for donor eggs paying $5500 ??!!??
We’ve all seen the ads on Craigslist that say something like “Have you had Hep A & B, we’ll pay you $500.00 for a one dy study” or “Nashville women 21-29, earn $5000+ through egg donation.” And maybe one or more of us have tried to get a little extra cash by participating in these study’s. Usually in these hard economic times we try to do everything possible to make ends meet. The Tax Court (that’s the IRS) recently came out and said that medical study income is taxable to the participant. Which is unlike what you had thought when you participated… Here is the case that the Tax Court ruled on:
In 2008, Covance Clinical Research Unit, Inc. advertised to find participants for a gout study. taxpayer X has suffered from gout since 1983, and since the study was being held near his home, he decided to sign up. The study required the taxpayer to be confined to the research facility for ten days and nine nights, where he had to follow a strict schedule of blood tests, urine tests, EKG, and vital screenings. Covance provided meals and lodging at the facility during the study and also required follow-up out-patient visits.
Covance paid the taxpayer $5,500 for his participation in the study. Despite receiving a 1099-Misc from Covance, the taxpayer excluded the amount from his income. Upon audit, the taxpayer was unable to produce the contract between himself and Covance. An attempt to report the income on an amended return during audit failed, and the case ended up in Tax Court. In Court, the taxpayer claimed the amount was either excluded under section 104 as compensation for physical injury or sickness, or the amount was a gift under section 102. Once again, the taxpayer failed to produce the contract. The Court looked at both exclusions offered under the code. First, under section 104, the Court found no evidence that the taxpayer suffered any injuries during the study. The gout was not brought on by the study itself and the taxpayer did not claim that Covance caused him harm. Next, under section 102, gifts are defined as “proceeds from a detached and disinterested generosity out of affection, respect, admiration, charity or like impulses.” The fact that Covance issued the taxpayer a 1099-MISC shows that the payment was not intended to be a gift.
Section 61(a) is clear that gross income includes all income from whatever source derived unless otherwise excluded by the Internal Revenue Code. Taxpayers bear the burden of proof that an amount of income is excludible. The Tax Court held the payment to be taxable income.
The lesson here is that we need to remember that nothing is free in life. And like most of our Dads use to say “nothing is for sure except death and taxes.” At Gunwel Associates we are here to help you with all of your tax needs. It is tax time and we are ready to prepare and efile your tax returns. We are open Monday through Saturday 8am- 8pm and Sundays by appointment. You work hard for you money, let us work smart to help you keep it. Give us a call at 615-730-9444 and visit our website at www.gunwel.com. See you soon!