Does Tax Court Ruling on Gender Reassigment Go Far Enough ?

Rhiannon G. O'Donnabhain (134 TC 4)

This was originally published on PAOO on August 12th, 2010.

There has not been much on the deductibility of gender reassignment. In 1983 PLR 8321042 allowed the travel expenses of a parent who accompanied an adult child who was having gender reassignment surgery. The surgery was performed in a clinic and it was necessary to have someone stay with the patient while they stayed in a motel. Then in 2006, we have CCA 200603025 which denied a deduction for the surgery itself. What had happened in the meantime was an amendment to the Code that denied medical deductions for "cosmetic surgery"

Although the subject of the CCA is anonymous, the facts seem to be the same as that in the case of Rhiannon G. O'Donnabhain (134 TC 4) which was decided in February. I have to admire Ms. O'Donnabhain for taking the case to the next level. The amount of money ($5,679) was not enormous compared to the hassle and sacrifice of privacy entailed. Who else has to have their pre-augmentation cup size published to the world ? (You'll have to read the case if you want to know. I'm not telling.) I think this was clearly one of those situations where somebody was thinking about principle not principal.

The taxpayer was mostly victorious being allowed deductions for hormone therapy, counselling and reassignment surgery. No deduction was allowed for breast augmentation, the hormones having apparently done enough in that regard (at least in the mind of the tax court).

This case received more media attention than most of the more obscure things that you can only read about in this blog, if you don't want to go slogging through the primary source material yourself, but I think there may have been a planning point missed in the discussions. The case summarized the deductions in question as follows :


During 2001 petitioner incurred and paid the following expenses (totaling $21,741) in connection with her hormone therapy, sex reassignment surgery, and breast augmentation surgery: (1) $19,195 to Dr. Meltzer for surgical procedures, including $14,495 for vaginoplasty and other procedures, $4,500 for breast augmentation, and $200 towards a portion of petitioner's postsurgical stay at Dr. Meltzer's facility; (2) $60 for medical equipment; (3) $1,544 in travel and lodging costs away from home for presurgical consultation and surgery; (4) $300 to Ms. Ellaborn for therapy; (5) $260 for the consultation for a second referral letter for surgery; and (6) $382 for hormone therapy. These payments were not compensated for by insurance or otherwise.

The case featured dueling experts on the validity of the Benjamin standards of care, which defines a process that should be followed in the treatment of Gender Identity Disorder. Basically you do a lot of therapy and have to publicly live as a member of the other gender for 12 months prior to having reassignment surgery, The IRS experts didn't put up a very good fight as the Court noted :


Even if one accepts respondent's expert Dr. Schmidt's assertion that the validity of the GID diagnosis is subject to some debate in the psychiatric profession, the widespread recognition of the condition in medical literature persuades the Court that acceptance of the GID diagnosis is the prevailing view. Dr. Schmidt's own professed misgivings about the diagnosis are not persuasive, given that he continues to employ the diagnosis in practice, believes that psychiatrists must be familiar with it, and recently gave a GID diagnosis as an expert in another court proceeding. On balance, the evidence amply demonstrates that GID is a widely recognized and accepted diagnosis in the field of psychiatry.

The question I would raise is whether there should not in fact have been even more deductions. If the 12 months of presenting as a member of the opposite gender is part of the treatment, then it would seem that the expenses associated with that should also be deductible. This could include voice coaching, training in walking or how to do make-up. It would be aggressive to argue that the initial work wardrobe might be viewed as part of the treatment cost. A variant of this might be the cost of abandoning the existing work wardrobe after the change becomes permanent.

The existing case law on work clothing would make me generally pessimistic on succeeding on the clothing, but something like voice coaching is clearly part of the whole treatment process. The legal cost of a name change should also be included. It may be that the 12 month process is not as challenging and expensive as I imagine it might be, since it is being done by someone who has been working up to it for a life-time. When I read the Benjamin standard description of the real life experience, though :

The act of fully adopting a new or evolving gender role or gender presentation in everyday life is known as the real-life experience. The real-life experience is essential to the transition to the gender role that is congruent with the patient’s gender identity. Since changing one's gender presentation has immediate profound personal and social consequences, the decision to do so should be preceded by an awareness of what the familial, vocational, interpersonal, educational, economic, and legal consequences are likely to be. Professionals have a responsibility to discuss these predictable consequences with their patients. Change of gender role and presentation can be a factor in employment discrimination, divorce, marital problems, and the restriction or loss of visitation rights with children. These represent external reality issues that must be confronted for success in the new gender presentation. These consequences may be quite different from what the patient imagined prior to undertaking the real-life experiences. However, not all changes are negative.

it sounds like the process includes spending some money and if it is integral to the process, it is part of the GID treatment and should be deductible.