Court rules not cosmetic but medical

[Pacun]

By Denise Lavoie, AP Legal Affairs Writer

BOSTON — The U.S. Tax Court ruled Tuesday that a Massachusetts woman should be allowed to deduct the costs of her sex-change operation, a decision that could have broad implications for transgender people.

Rhiannon O'Donnabhain (oh-DON'-oh-vin), who was born a man, sued the IRS after the agency rejected a $5,000 deduction for approximately $25,000 in medical expenses associated with the sex-change surgery.

The IRS said the surgery was cosmetic and not medically necessary.

In its decision Tuesday, the tax court said the IRS position was "at best a superficial characterization of the circumstances" that is "thoroughly rebutted by the medical evidence."

The legal group Gay & Lesbian Advocates & Defenders, which represented O'Donnabhain, said the ruling could potentially affect thousands of people a year in the U.S. who undergo similar operations.

"I think what the court is saying is that surgery and hormone therapy for transgender people to alleviate the stress associated with gender identity disorder is legitimate medical care," said Jennifer Levi, a GLAD attorney.

IRS spokeswoman Michelle Eldridge declined to comment on the ruling.

In a 2007 interview with The Associated Press, O'Donnabhain said she underwent sex-reassignment surgery at age 57, after a tormented existence as a father, husband, Coast Guardsman and construction worker.

She wrote off the $25,000 in medical expenses on her taxes, but the IRS disallowed the deduction, ruling that the procedure was not a medical necessity.

O'Donnabhain, now 65, said she brought the lawsuit in an attempt to force the IRS to treat sex-change surgeries the same as appendectomies, heart surgeries and other deductible medical procedures.

"It is not OK for them to do this to me or anyone like me," she said.

O'Donnabhain's lawyers argued that because gender-identity disorder is a recognized mental disorder that is generally treated with hormones and surgery, the costs are legitimate medical deductions.

The tax court agreed.

[kcjenkins]

Oh boy, here we go again. I guess it is hard for the IRS to keep up with changes in medical science, but I can't help but wonder if this is going to be another one of these 'have to fight for it every time' issues. Like bariatric surgery still is, where some doctors will advise obese patients to get it, but refuse to give them a letter saying it was a medical necessity.

[LisaAnn]

Ok, I need your opinions;

Client was over 500lbs and lost 300lbs (awesome determination!), but anyway because of the extreme weight loss, client had extra skin that needed to be surgically removed. His doctor did approve his surgery saying it was medically necessary due to getting sores, etc. Client went ahead with the surgey. Client's insurance company gave him the runaround and wouldn't pay....so client paid out of pocket for all expenses.

Are these expenses deductible as medical expenses becasue the Doc did approve as 'medically necessary' even though the insurance wouldn't pay?

[kcjenkins]

Absolutely deductible. Who paid for it is only relevant to the amount he has to deduct.

[LisaAnn]

I just thought maybe the IRS would take the stand like the insurance company and say that it was cosmetic and not medically necessary. But I feel comfortable that I have documentation from the Doctor stating is was medically necessary. Thanks KC

[kcjenkins]

The insurance company makes a contract with the insured to provide x amount of coverage of certain specific events. Just because something is medically necessary may not mean that a specific policy covers it. Therefor, the coverage has nothing to do with the deduction.