Who Knew? Donating Body Parts Is a Taxable Event

By Teresa Ambord, Correspondent
 
You're selling . . . what? Mark Parisi wasn't kidding when he said he would give a testicle to own a shiny new car. That is, for the donation of his testicle, he expects to receive a "standard fee" of $35,000 with which he plans to buy a car. He just wanted to know if the transaction was taxable. 
 
As unusual as this may seem, for Parisi, it's not that much of a stretch. He has participated in medical research studies before and estimates over two years, he's made a cool $150,000 "working" as a human guinea pig. He told Left Lane news he netted $5,000 a week when he took part in a study of the Ebola virus. Seems a little risky to mess with a deadly hemorrhagic disease for any amount of money, but so far, he's lived to tell about it. 
 
No Hidden Income 
Parisi isn't hiding his little side business. In fact, he appeared on Extreme Cheapskates (a TLC show), where he said his donated testicle will be replaced with a prosthesis. He explained, to be legal, medical research studies such as the ones he participates in, must be approved by the Food and Drug Administration.
 
He also went on The Doctors, a CBS show that features a panel of people who, according to the show, are real physicians. The doctors confirmed that indeed, selling body parts is illegal. The National Organ Transplant Act states it's illegal to "acquire, receive, or otherwise transfer any human organ for valuable consideration." 
 
Parisi says no problem, because he's not "selling" his testicle. He's donating it for a "standard fee" to participate in a medical study. And the going rate for a testicle, he says, just happens to be $35,000. The car he wants to buy, a Nissan 370Z, runs between $30,000 and $40,000, which fits his price range.
 
There is, however a little matter of tax. 
 
Pay the Tax Man
Whether the income from the donation of his body part is legal or illegal doesn't affect the taxability, said Forbes magazine. Last year, the US Tax Court ruled in Daniel Hugh O'Connor v. Commissioner of Internal Revenue (T.C. Memo 2012-317) that gross income is defined as "all income from whatever source derived unless otherwise excluded by the Internal Revenue Code."
 
Also, Parisi incurs expenses in the process of donating, and he can even deduct those if they don't violate public policy. And if he itemizes, he may qualify for a medical expense deduction. The good news for Parisi is, while the income for his donation is taxable, it isn't subject to self-employment tax.
 
State Tax Deductions
Forbes says if no consideration is given for the donation, the process is not illegal. In fact, about a third of states offer state tax incentives to people who donate a kidney, a portion of their liver, or bone marrow for transplantation. Those states include Arkansas, Georgia, Idaho, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, New Mexico, North Dakota, Ohio, Oklahoma, South Carolina, Utah, Virginia and Wisconsin. According to Forbes, the average deduction runs $10,000, and since most states have tax rates that average around 6.5 percent, the tax savings top out at about $650. Parisi lives in Nevada, where there's no state income tax. 
 
Medical research must go on, and human guinea pigs advance the research. So there's a place for people like Mark Parisi in the grand scheme of things. But . . . you have to admit, it sounds a little nutty.

You may like these other stories...

Legislation coming out of Washington just might reduce homeowners' burden for disaster insurance. It's a topic very much on everyone's minds since the mudslide in Oso, Washington. The loss of human life was...
Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...
IRS chief: New rule on the way for tax-exempt groupsIRS Commissioner John Koskinen told the USA Today on Monday that the agency will likely rewrite a proposed rule regulating the political activities of nonprofit groups to...

Upcoming CPE Webinars

Apr 17
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.