Law Humor

Therapeutic?  Probably.  Deductible?  No.

So ruled the U.S. Tax Court yesterday in the case of William Halby, a New York tax attorney who claimed that the amounts he spent on, let's call them personal-gratification-related books and materials, and also numerous professional intimate-therapy service providers, were "medical expenses" that he could deduct under Section 213 of the Internal Revenue Code.  Sure, at first glance this may seem entirely reasonable.  Section 213(d)(1) defines "medical care" as amounts paid not only for diagnosis and treatment of disease but also "for the purpose of affecting any structure or function of the body."  Although I would prefer not to think about it too much, it seems very likely that the reported activity would have affected one or more of Mr. Halby's structures or functions.  So, case closed?

Not quite.  Partly because you have to document these things.  Under IRS regulations, the court noted, "[t]o substantiate these expenses, the taxpayer must furnish the name and address of each payee and the date and amount of each payment."  If requested, he must also "furnish a statement or itemized invoice identifying the payment, the type of service rendered, and the specific purpose of the expense."  Now, if you think this requirement posed a problem for Mr. Halby, you would be right, but maybe not for the reason you think.  Mr. Halby did, remarkably, keep track of his expenses in a therapy journal in which he even documented his visits to his numerous "service providers."  He did not, however, have itemized invoices for many of the services provided, and failed to provide specific descriptions of said costs by means of an appropriate attachment to his Schedule A.

Also, turns out that paying for sex is actually illegal, at least in New York, and that IRS regs do not allow deductions for "any illegal operation or treatment."  The court ruled that Halby's payments in this regard "were personal expenses not prescribed by a doctor and not intended to treat a medical condition," and that he therefore could not deduct the more than $100,000 he was claiming for that purpose.

TaxProfBlog also notes that Mr. Halby made a similar claim in a 2008 state case in which he sought to deduct $322,000 for the same reason, and with the same results.

Link: TaxProfBlog (with links to the court decisions)