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Tax Court: No to Medical Deductions for Porn, Prostitutes

Retired tax attorney sought $100,000 in deductions for 2004, 2005; says he'll appeal

Tax Court: No to Medical Deductions for Porn, Prostitutes

BROOKLYN, N.Y.—A retired tax lawyer has lost his first court battle with the Internal Revenue Service over an attempt to claim more than $100,000 in medical deductions for visits to prostitutes and the purchase of pornography.

William G. Halby, 78, who spent 40 years as an attorney specializing in tax law, attempted to claimed medical expense deductions of $76,314 for 2004 and $49,203 for 2005. The IRS issued a notice of deficiency for 2004, however, disallowing $2,368 for medical books, magazines, videos, and pornographic material, $65,934 for prostitutes and $5,632 in bank and finance charges incurred in connection with loans used to pay for the claimed medical expenses. The agency also disallowed $47,024 for 2005, including $5,005 for books, magazines, videos, and pornographic materials and $42,152 for prostitutes.

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Tax Judge Joseph Robert Goeke questioned the claims in light of the fact that Halby never communicated with his doctor regarding the declared therapies.

“During 2004 and 2005, petitioner frequented prostitutes in New York,” Goeke wrote in his decision. “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. The journal included the date, the name of the ‘service provider,’ and the amount. Petitioner did not discuss these visits with his doctors afterwards to determine their impact on his health. 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.”

Because the therapy at issue was self-prescribed, Goeke sided with the IRS in its determination that Halby was not entitled to the deductions, and upheld its assessment of $21,491 in back taxes and $4,298 in penalties.

“Patronizing a prostitute is illegal in the State of New York,” Goeke wrote. “Petitioner’s payments to various prostitutes were personal expenses not prescribed by a doctor and not intended to treat a medical condition. Petitioner is not entitled to deductions for these amounts. 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.”

For his part, Halby told WebCPA he intends to appeal the verdict on the grounds that Goeke did not take into consideration the merits of his argument that the New York state statute outlawing prostitution violates the constitutional right to privacy.

"I cited a lot of medical literature in my brief," he said. "This is medical treatment and does not have to be prescribed by a doctor. It's not the licensing or qualification of the person who renders the service, but that the service is medical."

Interestingly, Halby cited Lawrence v. Texas and Cherry v. Koch in his brief, and noted that some European countries such as Denmark, Germany and Switzerland consider the treatment he received medical in nature.

This is not the first time Halby has fought (and lost) a case of this sort. Last September, he lost a case before the New York State Division of Tax Appeals in which he had tried to deduct $322,000 in sex-related charges for 2001-2005.

Halby told WebCPA he also has an appeal pending before the New York state tribunal and does not expect either the federal or state appeals to come up for consideration until next year.






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Tom Hymes

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