Would you sell a body part for a new car?
Mark Parisi would. He appeared on CBS’s show The Doctors to discuss with the panel his plans to sell his left testicle for $35,000. But he’s not selling his testicle for any old reason: he wants a new car. Specifically, he wants a Nissan 370Z, described on Nissan’s website as “a serious car for serious drivers.” Agreed. You have to be pretty serious to want to sell a body part in order to buy a new car. Luckily for Mr. Parisi, the sticker price for the Z cars hovers between $30,000 and $45,000.
Of course, the doctors (assuming they’re real doctors as the show claims) on the show should know that selling body parts is illegal. As part of The National Organ Transplant Act (downloads as a pdf), it’s illegal to “acquire, receive or otherwise transfer any human organ for valuable consideration.”
That’s why Parisi was careful to couch it as a donation for medical research for a “standard fee.” Apparently, if Parisi is to be believed, the going rate for a testicle donation for science is $35,000.
Parisi appeared on TLC’s Extreme Cheapskates talking about the same study. On TLC, however, he explained a bit more. He’s participating in a medical study, something he does quite a bit, apparently. For this particular study, there’s a twist: his testicle is being replaced with an artificial one. Medical studies are legal so long as they’re approved by the Food and Drug Administration (unlike the flatlining study Parisi hoped to participate in until the study was banned) and compensation for your time and er, testicle (and/or other organs) is perfectly okay.
But what about that compensation? Is it taxable? That question came up this morning as WMMR’s Preston & Steve, a popular morning radio show in Philadelphia, tackled the issue.
It’s a subject I’ve taken on before – though, in my case, it was much less salacious. I had previously pondered whether money “paid” to my son from the tooth fairy would be taxable, assuming that he was subject to tax, and if so, as what kind of income? A number of tax folks weighed in as to whether it would be ordinary income, capital gains, or a gift and thus, not taxable.
We never really reached a consensus on the tooth fairy (the gift element makes it tricky) but the tax consequences of the sale or donation of a body part are pretty clear.
Easy part first: just because something is illegal doesn’t make it non-taxable. Income is still income. As with prostitution and the sale of illegal drugs, income from illicit activities is still reportable and taxable. Some of the expenses related to the illegal activities may even be deductible so long as they’re not against public policy and are otherwise not specifically prohibited as they are for drugs and illegal kickbacks. So if you sell a kidney, an ear, or whatever the black market desires, be sure to report the income or you’re breaking the law twice.
Donating body parts is not illegal. And since a donation is made without consideration, you’re generally out of pocket for your expenses. To lessen the burden, 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 are Arkansas, Georgia, Idaho, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, New Mexico, North Dakota, Ohio, Oklahoma, South Carolina, Utah, Virginia, and Wisconsin. The average deduction runs $10,000; since most states have tax rates that average around 6.5%, tax savings top out at about $650. For federal purposes, costs may be deductible as medical expenses for taxpayers who itemize but you’re still at a loss – and I don’t just mean your body part. The reality is that most folks who make living donations do so out of a genuine desire to make a difference and not to make money.
Which brings us back to Parisi. Assuming his story is accurate, he is being compensated $35,000 to participate in a medical study. That amount is taxable. In a case brought before the U.S. Tax Court last year, O’Connor v. Commissioner (T.C. Memo 2012-317, downloads as a pdf) the ruling emphasized that the section 61(a) of the Tax Codes defines gross income as “all income from whatever source derived unless otherwise excluded by the Internal Revenue Code.” The taxpayer made a few arguments that the payments were excludable: first, as a payment received on account of physical illness or physical sickness and alternatively, as a gift.
Both arguments by the taxpayer were rejected, as they would be for Parisi. There is no alleged “physical injury or sickness” which might require medical experimentation to resolve. Additionally, there is no evidence that Parisi is doing this out of the goodness of his heart (in fact, he’s been very outspoken about the fact that he’s doing it for a car). Finally, there is nothing to suggest that the medical facility is paying Parisi “out of detached and disinterested generosity.”
It is a payment for services. And it is taxable. There’s even a line for it on form 1099-MISC (the instructions state that proceeds from medical research studies are includable at box 3 as “other income”).
While payments for these services are taxable, they are generally not subject to self-employment income; however, to the extent that it’s considered a trade or business, it would be (based on Parisi’s alleged history, including compensation for an ebola study, he may certainly be approaching the line).
I’ve never wanted anything – especially a car – so much that I would consider surgery in order to get it. I’m rather fond of all of my fingers, toes, and other body parts, so I can’t quite wrap my head around Parisi’s actions. But maybe that’s just me. So I have to ask: is there anything you’d give up in exchange for cash? And how much would someone have to pay you?
