Perez v. Commissioner

Nichelle Perez signed a contract with an egg-donation clinic, Donor Source International, agreeing to hormone injections and surgical egg extraction in exchange for a flat $10,000 payment for her pain and suffering, unrelated to the quantity or quality of eggs retrieved, and repeated the process for another $10,000 later that year. Believing the payments were tax-free personal-injury compensation, Perez didn't report the $20,000 on her tax return; the IRS issued a deficiency notice, and Perez petitioned the Tax Court arguing the money wasn't taxable income.