Last year, I blogged Chief Counsel Advice 200603025, which ruled that that male-to-female gender reassignment surgery does not qualify as a deductible medical expense under § 213:
Whether gender reassignment surgery is a treatment for an illness or disease is controversial....To our knowledge, there is no case law, regulation, or revenue ruling that specifically addresses medical expense deductions for GRS or similar procedures. In light of the Congressional emphasis on denying a deduction for procedures relating to appearance in all but a few circumstances and the controversy surrounding whether GRS is a treatment for an illness or disease, the materials submitted do not support a deduction. Only an unequivocal expression of Congressional intent that expenses of this type qualify under section 213 would justify the allowance of the deduction in this case. Otherwise, it would seem we would be moving beyond the generally accepted boundaries that define this type of deduction.
The Associated Press reports that the Tax Court will take up the issue in a trial scheduled to begin next week: IRS Sued Over Sex-Change Tax Deduction; Government Calls Procedure "Cosmetic"
After a tormented existence as a father, a husband, a Coast Guardsman and a construction worker, a 57-year-old suburban Boston man underwent a sex-change operation. Then she wrote off the $25,000 in medical expenses on her taxes. But the IRS disallowed the deduction -- ruling the procedure was cosmetic, not a medical necessity -- in a potentially precedent-setting dispute now before the U.S. Tax Court. Rhiannon O'Donnabhain is suing the IRS in a case advocates for the transgendered are hoping will force the tax agency to treat sex-change operations the same as appendectomies, heart bypasses and other deductible medical procedures. The case is set to go to trial July 24. ...
The U.S. Tax Court has never issued an opinion in a similar case, said Jennifer Levi, an attorney with Gay & Lesbian Advocates & Defenders, the Boston-based legal organization representing O'Donnabhain. But the IRS has ruled against allowing the deduction in at least one other case. In a 2005 case, the IRS ruled the costs of a woman's gender reassignment surgery and related treatments were not deductible as medical expenses. The IRS cited the section of the tax code that says cosmetic surgery or similar procedures are deductible only when they are needed to improve a congenital abnormality, an accident or trauma, or a disfiguring disease. In a 1983 case, however, the IRS allowed a father to deduct his transportation costs when he accompanied his college-age son to a clinic where he received a sex-change operation.
Levi argues that because gender-identity disorder is a recognized mental disorder that is generally treated with hormones and surgery, the costs are legitimate medical deductions. "Every mental health textbook and medical dictionary recognizes the legitimacy of both the diagnosis and course of treatment," Levi said.
(Hat Tip: Donna Byrne.)