Court Denies Tax Lawyer's $100,000 Medical Expense Deduction for Prostitutes and Porn

Via Joe Kristan:  The Tax Court yesterday denied a New York tax lawyer's claimed $100,000+ medical expense deduction for the costs of prostitutes and pornographic material.  Halby v. Commissioner, T.C. Memo. 2009-204 (Sept. 14, 2009):

During 2004 and 2005 petitioner frequented prostitutes in New York. Petitioner did not visit these prostitutes as part of a course of therapy prescribed by his doctor, nor did petitioner ask his doctor to prescribe any sort of sex therapy. Petitioner kept track of these visits in a journal. ...

During 2004 and 2005 petitioner purchased pornography and books and magazines on sex therapy. Petitioner also recorded the dates and amounts of the purchases in his journal. ...

The $73,934 disallowed by respondent for 2004 included: (1) $2,368 for medical books, magazines, videos, and pornographic material; [and] (2) $65,934 for prostitutes ... The $47,024 disallowed for 2005 included: (1) $5,005 for books, magazines, videos, and pornographic materials; and (2) $42,152 for prostitutes. ...

The issue for decision is whether petitioner is entitled to deduct amounts paid to prostitutes and for medical texts and pornographic materials. Respondent argues that petitioner is not entitled to deduct amounts paid to prostitutes because such payments were illegal and petitioner has not provided substantiation as required by section 1.213-1(h), Income Tax Regs. Respondent argues that petitioner is not entitled to a deduction for amounts paid for books on sex therapy and pornographic material because those amounts were incurred for petitioner’s general welfare, not pursuant to a doctor’s prescription or for a specific medical condition. ...

We agree with respondent that petitioner is not entitled to deduct the amounts at issue. Patronizing a prostitute is illegal in the State of New York. ...

Petitioner is likewise not entitled to deductions for amounts paid for books and magazines on sex therapy and pornography. The purchases were not for the treatment of a medical condition but were instead personal items. ...

Petitioner did not have reasonable cause or a reasonable basis for claiming the deductions at issue. Petitioner has been an attorney for 40 years and specialized in tax law. Petitioner should have known that his visits to prostitutes in New York were illegal and that section 213, the regulations thereunder, and caselaw do not support his claimed deductions. Accordingly, petitioner is liable for the section 6662 penalty.

Mr. Halby made a similar claim on his New York State tax returns, and lost that case as well.  In re Halby, Nos. 821494 & 821810 (N.Y. Tax App. Sept. 18, 2008).  The New York Post provides more lurid details in Kinky Bid to be Tax XXX-emot; Att'y Hooker Therapy KOd:

The 77-year-old Brooklyn lawyer owes tens of thousands of dollars in back taxes for wrongly deducting more than $300,000 in prostitutes, porn, sex toys and erotic massages, a state tax judge ruled yesterday. The ruling came despite the meticulous efforts of Halby -- a tax lawyer -- to prove the deductions were reasonable medical expenses in his effort to fight depression and erectile dysfunction brought on by age.

"I was depressed," Halby, who's divorced, semi-retired and living alone in a Bay Ridge apartment, told The Post yesterday. "I live a solitary life. I have no social life. I needed that release."

Halby said he found his "sex surrogates" - preferably brunettes - through ads in The Village Voice and sometimes visited them several times a week. "Over the years, I've been with dozens of girls for full-body massage with . . . happy ending," he said.

All told, Halby spent about $322,000 to satisfy his desires, according to court papers.

In 2002 alone, Halby deducted $111,364 for "therapeutic sex" and massages "to relieve osteoarthritis and enhance erectile function through frequent orgasm."

He claimed another $2,173 on porn "to enhance sexual performance in lieu of taking Viagra."

In 2003, his $101,930 in deductions included $162 for "sexual performance aids" such as lubes, condoms and nipple clamps, the court papers said.

• Gothamist:  Elderly Tax Lawyer Told He Can't Write Off Hookers.

Update: 

• ABA Journal
• Feminist Law Professors
• Going Concern