Health Law

?GENDER REASSIGNMENT THERAPY? CAN BE TAX DEDUCTIBLE --TAX COURT.

By Greg Piche'

63 year old Rhiannon O?Donnabhain, formerly known as Robert O?Donnell, divorced father of three, former sailor, construction worker and engineer, has prevailed in tax court on her claim for the deductibility of $25,000.00 in out of pocket expenses for therapy and surgery related to converting her sex from male to female. The issue is whether 26 U.S.C. Section 213 of the federal tax code permits the deduction of sex change expenses as treatment for a ?disease? or whether it was non-deductible as ?cosmetic surgery.?

This is the first time the Tax Court has addressed this issue since the 1990 Amendment to Sec. 213, which excludes elective ?cosmetic surgery.? Congress amended the tax  code after a number of tax decisions that determined that facelifts, hair transplants and some hair removal procedures met the definition for deduction under the code as treatment for a disease. Ms. O?Donnabhain argued that ?Gender Identification Disorder? was a recognized mental defect in DSM IV (?Diagnostic Statistical Manual?) and met the criteria of ?disease? as required in the tax code.  Both sides presented expert opinion for the court?s consideration and the Court found the overwhelming medical evidence to support the deductibility of the expenses.

In an earlier case in 2005, the court identified cosmetic surgery as being deductible ony when necessary to improve a congenital abnormality an accident trauma, or a disfiguring disease. O?Donnabhain?s evidence seemed to suggest that from the perspective of a gender torn person, that all of the above criteria would be applicable at least from a conceptual perspective and that she met all of the so-called Johnson criteria supporting the necessity of medical intervention. The IRS for its part relied on several experts affiliated with a Gender Identity Clinic at Johns Hopkins who were essentially ambivalent on the issue  of whether GID was a disease or medically necessary. 

The court determined that the showing of the treatment of a ?disease? essentially dispatched the cosmetic surgery exclusion argument.  The court rejected the argument that ?disease? under the code must have an organic or physiological basis and held that included both a ?physician or mental defect.? See O?Donnabhain v. Commissioner, 134 T.C. No. 4 (Feb. 2, 2010). Somehow neither euphemisms of ?reassignment? or ?cosmetic? surgery fairly describe what is involved here. That is like calling heart transplant surgery as a ??rebooting.?

Full post as published by Healthcare Law Blog on February 07, 2010 (boomark / email).