Paul L. Caron

Tuesday, October 2, 2007

WaPo: Tax Court to Decide Deductibility of Sex-Change Operation

I previously have blogged (here and here) the Tax Court trial in O’Donnabhain v. Commissioner, raising the question of whether male-to-female gender reassignment surgery qualifies as a deductible medical expense under § 213.  In Chief Counsel Advice 200603025, the Service denied the deduction (blogged here). The Washington Post has picked up the story in Woman Suing IRS Over Sex-Change Tax Claims; Case to Test if Procedure Is Deductible, by Anthony Faiola:

After years of painful soul searching, Rhiannon O'Donnabhain -- a former construction engineer from a devout Irish Catholic family in Boston -- decided to surgically change his sex to female in 2001. The struggle was equally tough financially -- hormone treatments and medical procedures set her back $25,000, a burden she felt could be partially offset by taking a $5,000 tax deduction for medical costs.

When she sent in her tax claims after the surgery, the IRS initially issued the 64-year-old former Coast Guard reservist a refund check for $5,000. But soon after, she was audited and ordered to return the refund because the IRS had determined that her surgery had been merely "cosmetic" -- and therefore not tax deductible.

Rather than return the money, O'Donnabhain opted to sue the IRS. The result has been a riveting case -- the first of its kind in normally staid U.S. Tax Court -- in which lawyers have just concluded oral arguments and are set to present a new round of written briefs next month. The core question is this: Should changing your sex be tax deductible?

The answer, according to leading medical experts, is an unequivocal yes. In fact, O'Donnabhain's treatment by the government has sparked outrage among medical professionals who specialize in gender identity disorder, a condition that leads an estimated 1,000 to 2,000 Americans a year to undergo sex-change operations.

"When did the IRS suddenly become physicians?" said Marshall Forstein, associate professor of psychiatry at Harvard Medical School. "It's absolutely clear that transgender identity is a condition discussed in diagnostic manuals. It seems the IRS is now in the business of practicing medicine without a license."

Update:  WSJ Law Blog: Is a Sex Change Tax Deductible?

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S/he could cite this paper to deduct it as a tax preparation expense...

...In this paper we try to show how a simple model of household production can be used to help the analysis of optimal taxation and tax reform, and to put the conventional wisdom, which says that it is optimal to tax women on a separate, lower tax schedule than men, on a firmer basis...

Posted by: Anonymous | Oct 2, 2007 7:43:56 AM

This story reminds me why the best part of the Washington Post is the comics and trash pickup schedule for holidays.

It may be too much to ask a ‘professional journalist’ to present fairly the other side of an issue and actually read the Chief Counsel Advice 200603025.

Chief Counsel relied on the ‘medical profession’. John Hopkins Hospital ceased performing sex change operations. It determined that this condition is a mental illness. Hopkins concluded that a sex change operation is not an effective treatment for this mental illness. See Surgical Sex, Dr. Paul McHugh, 2004 First Things 147 (November 2004) 34-38.

Please note, Dr. Paul McHugh, was Psychiatrist-in-Chief at John Hopkins Hospital. He is somewhat more credible than a citation from an associate professor at Harvard. But then again the Washington Post cannot help taking another shot at the Catholic Church.

Posted by: DM | Oct 2, 2007 7:20:40 AM