A taxpayer recently called our office and indicated she was interested in being a surrogate mother. Her idea was to carry the baby for a fee (not unusual). She would carry the fertilized egg for biological father and mother. I was very impressed by what a giving person she was. She thanked me, but indicated she was not that giving, since the fee was $50,000. She further indicated the $50,000 fee is tax free due to the pain and suffering she incurred delivering a baby. While I am a father of four, I cannot personally relate to the pain and suffering. Would the payments be tax free? When she is out of work could she collect unemployment? What about workers compensation?