Tax Court Rejects Lawyer's Deductions for Prostitutes, Pornography

September 18, 2009 ( - A new U.S. Tax Court case barring a tax lawyer from claiming $125,000 in medical expenses for prostitutes and pornography as income tax deductions also means that reimbursements from employee medical accounts for such activities should also be disallowed.

EBIA said the Tax Court’s finding that patronizing a prostitute was illegal in the state of New York and that sex therapy books and magazines were not legitimate items to help treatment of a medical condition also means administrators of flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) should not allow claims for reimbursement under Section 213 of the Internal Revenue Code. That section disallows such reimbursements for illegal operations or treatments.

The case involved tax attorneyWilliam G. Halby, who included $76,314 in itemized medical deductions on his 2004 tax return and $49,203 for his 2005 return – deductions tax officials later disallowed. The deductions were for visits to prostitutes and purchases of pornography, books and magazines on sex therapy, and videos.

According to the Tax Court’s ruling, Halby contended sex therapy should be considered a legitimate medical treatment for the purposes of the tax law. However, the court rejected that view and said the expenses were personal choices made by Halby affecting his general welfare and not part of a doctor’s care for a specific ailment.

Even though Halby recorded details about his experiences in a journal, the tax court ruled the expenses for which he sought a deduction were improperly documented.       


The Tax Court ruling is available here .