Tax Court to Rule on Sex Change

The U.S. Tax Court in Boston is reviewing whether expenses of a sex-change operation are deductible.

Rhiannon G. O’Donnabhain, born anatomically male, was diagnosed by her psychotherapist in 1996 with gender identification disorder (GID), which she says caused her extreme discomfort since childhood. In 1997, O’Donnabhain began taking feminizing hormones and presenting herself as a female. She also changed her legal name. In 2001, after her psychotherapist, psychologist and surgeon recommended gender reassignment surgery, O’Donnabhain underwent the procedure and reported finally feeling a sense of comfort with her body.

She claimed a medical expense deduction for all costs relating to her surgery on her 2001 income tax return. The IRS disallowed the deduction and issued a notice of deficiency, ruling that the surgery was cosmetic and elective. Cosmetic surgery, defined as intended to improve appearance rather than to promote bodily functions or prevent or treat illness or disease, typically is not a deductible medical expense under IRC § 213. An exception is made for surgery to correct a congenital disfigurement or one caused by an injury or disease.

The case has provoked debate whether gender reassignment surgery is necessary to correct what O’Donnabhain argues is a medically recognized mental disorder. The IRS’s argument is outlined in Chief Counsel Memorandum 200603025.

The Tax Court heard arguments in July and August and is expected to rule in early 2008.

O’Donnabhain v. Commissioner, Tax Court docket 006402-06