Paul L. Caron

Tuesday, October 2, 2007

IRS: Why Cost of Gender Reassignment Surgery Is Not a Deductible Medical Expense

Following up on this morning's post on the pending Tax Court case of O’Donnabhain v. Commissioner (No. 6402-06), here is the Government's Pretrial Memorandum arguing that the expenses of male-to-female gender reassignment surgery do not qualify as a deductible medical expense under § 213:

The threshold requirement for deductible medical expenses is that they meet the definition of medical care in I.R.C. § 213(d). It is respondent’s position that petitioner’s SRS, feminizing hormones, and associated expenses were not for the cure, mitigation, or treatment of disease, although they did affect a structure or function of her body.

The Diagnostic and Statistical Manual of Mental Disorders – Fourth Edition (DSM-IV), published in 1994, and the Diagnostic and Statistical Manual of Mental Disorders – Fourth Edition Text Revision (DSM-IV-TR), published in 2000, are publications of the American Psychiatric Association. The DSM-IV and DSM-IV-TR are used in the United States for diagnosis of mental disorders. The use of the coding system in the DSM assists the health care provider and the patient in obtaining insurance coverage. However, it is respondent’s position that the mere inclusion of a disorder in the DSM-IV and/or DSM-IV-TR does not establish that it is an illness or disease for purposes of I.R.C. § 213. The DSM-IV and DSM-IV-TR contain many conditions which are actually social or behavior matters, for example “caffeine intoxication.” Other so-called disorders in the DSM appear not to have any component of illness, mental or otherwise, such as “Circadian Rhythm Sleep Disorder, Jet Lag Type,” i.e., jet lag.

Both the DSM-IV and DSM-IV-TR contain Cautionary Statements, stating in part that “inclusion...of a diagnostic category...does not imply that the condition meets legal or other non-medical criteria for what constitutes mental disease, mental disorder, or mental disability.” Further, by their own terms, the DSM-IV and DSM-IV-TR “may not be wholly relevant to legal judgments...”

Respondent’s expert witness, Dr. Park Dietz, will testify that GID is not the result of pathology, and therefore is not a disease. Dr. Dietz is a Clinical Professor of Psychiatry and Biobehavioral Sciences at the UCLA School of Medicine. ...

Even if the Court were to determine that GID is a disease within the meaning of I.R.C. § 213(d)(1)(A), petitioner’s SRS, feminizing hormones, and associated expenses would still not deductible because they are cosmetic or other similar procedures. ...

In the present case, petitioner changed her appearance from masculine to feminine through a series of hormonal and surgical procedures. Because petitioner expressed distress at her male appearance and desired to look like a woman, it is clear that she intended to change her appearance, and that a feminine appearance was a subjective improvement to her. Therefore, petitioner’s SRS and feminizing hormone treatment was directed at improving her appearance. In this regard, the feminizing hormone treatment is excluded from the definition of medical care, even though the hormones were prescribed by a doctor, because they were a cosmetic or similar procedure within the meaning of I.R.C. § 213(d)(9).

Petitioner’s surgery and hormone treatment did not merely “incidentally” affect her appearance, but rather, it drastically affected her appearance. After being on the hormone therapy prior to her surgery, petitioner was able to live full time in the female role, that is, to “pass” as a woman. The purpose of the surgery was to entirely remove petitioner’s male genitalia and to create the appearance of female genitalia by plastic surgery. Petitioner received breast implants to enlarge her breasts, even though she had already obtained breast development as a result of the hormone treatment. Petitioner admits that her breast augmentation did not promote the proper function of her breasts.

SRS and feminizing hormones did not meaningfully promote the proper function of petitioner’s body or prevent or treat illness or disease, and is therefore cosmetic in nature. Respondent’s expert witness Dr. Chester W. Schmidt, Jr., will testify that SRS does not meaningfully treat GID....

Dr. Schmidt will opine that even though GID is a diagnostic category in DSM-IV-TR, it is not universally accepted as a diagnosis. He will also opine that there is not “a consensus in American medicine about the requirements for treating Gender Identity Disorder, the medical necessity of the procedures requested by the patients, or a standard of care that meets the legal definition of a community standard (the care provided by the prudent practitioner in that community).” In Dr. Schmidt’s opinion, there is no community standard of care that hormone therapy and SRS must or should be provided to persons with GID. Dr. Schmidt will opine that hormone therapy and SRS are elective procedures which are not medically necessary. It is his opinion that a person may elect such procedures as a personal decision, but that medical providers should properly remain neutral as to those procedures unless they are contraindicated for some medical or psychiatric reason. Further, Dr. Schmidt will testify that there is “no scientific evidence of a genetic or congenital

In sum, petitioner’s expenses for feminizing hormones, SRS, and expenses related thereto for transportation and meetings with Ellaborn and Coleman, are non-deductible personal expenses.

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Part of the Obama Administration's civil rights agenda, as found on, states: "President Obama supports full civil unions that give same-sex couples legal rights and privileges equal to those of married couples. Obama also believes we need to repeal the Defense of Marriage Act and enact legislation that would ensure that the 1,100+ federal legal rights and benefits currently provided on the basis of marital status are extended to same-sex couples in civil unions and other legally-recognized unions." The administration should instruct the IRS to withdraw the February 2006 Chief Counsel Advice on the treatment of community income of registered domestic partners in California. It quotes candidate Obama as saying "Too often, the issue of LGBT rights is exploited by those seeking to divide us. But at its core, this issue is about who we are as Americans. It's about whether this nation is going to live up to its founding promise of equality by treating all its citizens with dignity and respect." The administration should instruct the IRS to stipulate in the gender reassignment surgery case that there is no deficiency, that its position was erroneous, and that judgment should be entered for the taxpayer. No need to wait for Congress. No need to wait at all.

Posted by: Don Read | Jan 27, 2009 4:38:32 PM