Reference no: EM133647916

Problem: Tax Research

Hospital M is a large not-for-profit healthcare system that performs patient care, conducts research, and trains healthcare professionals. M has requested and received from the IRS tax-exempt status under Section 501(c)(3).

The Medical Research Group of M receives funding from governments, private organizations, and donors to fund various medical research activities. Participants in M's research come from patients and members of the communities M serves. Participants are not prohibited from being included in multiple studies during the same year. Furthermore, M is very concerned about healthcare disparities and would like to conduct more research activities that include underrepresented groups in the future.

M provides compensation for research participants in two ways. First, patients who incur specific expenses - mileage, parking, etc.- are reimbursed. Second, M realizes that research participants need incentives to compensate them for their time and effort to participate in medical research studies. M traditionally has issued checks to participants once the research is completed. Since there can be several months between the time participants begin the study and this issuance of checks, M is looking for more immediate compensation methods.

M is considering giving out cash cards to study participants. Once issued a card, each time the same person participates in research, money will be added to the card to reimburse them for expenses and compensate them for their time. They feel this will be attractive to both the current group of test participants and resolve some of the issues of attracting a more diverse participant base.

The Medical Research Group has asked you if any tax reporting issues or concerns need to be addressed as they launch the new program. In the meeting where you discussed the facts above, it was noted that research participants' expenses are reimbursed under an accountable plan established by Hospital M. Documentation is required by research participants to support the expenses being reimbursed.

Hint:

There are two issues presented that you should address with respect to payments made to research participants.

What are the issues, authorities, conclusion and analysis for this case?