Thursday, February 4, 2010

No tax deduction for the good looking!

As I‘ve previously shared with you, we frequently receive questions from clients asking what else they can deduct to lower taxable income. In the “bet you haven’t tried this one” category falls a recent tax court decision that allowed a taxpayer to deduct the costs of a sex change operation as a medical deduction.

The taxpayer was born male, but was diagnosed with gender identity disorder. The treatments for the disorder included gender reassignment surgery and breast augmentation. IRS disallowed all of it, calling it cosmetic surgery and claiming that the disease had to arise from an organic pathology.

Enter the tax court. The court determined that gender identity disorder was a disease along the lines of a mental disorder and that treatments for it fell within the parameters of allowable medical costs. However, the court balked at the breast augmentation, stating that its goal was to improve the taxpayer’s appearance and not promote proper body function. Was that a nice way of saying that not only was this person seriously conflicted, but she was ugly to start with too?

We won’t know. Court decisions don’t include pictures.

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