Brooklyn attorney William Halby has lost his latest try at deducting his expenses for prostitutes, erotic massages, and pornography from his tax returns.

The State of New York Tax Appeals Tribunal denied Halby’s petition after the state’s Division of Taxation disallowed his itemized deductions of medical expenses for erotic materials, sexually related publications, male enhancement pills, and miscellaneous services provided by prostitutes.

In August 2005, the Division of Taxation began auditing Halby’s income tax returns for 2002, 2003 and 2004. For 2002, Halby, claimed a medical expense deduction of $105,271.000. Among the medical expenses claimed was an expense of $111,364.00, of which $40,588.00 was categorized as “therapeutic sex” and $70,776.00 as “massage therapy to relieve osteoarthritis and enhance erectile function through frequent orgasms.”

Also included as part of the medical expense deductions claimed were the sums of $658.00 for medical books, videos and periodicals and $2,173.00 for “pornography to enhance sexual performance in lieu of taking Viagra.”

In the Division’s field audit report, in the explanation of adjustments, the auditor stated, “The $111,364 of expense for sexual activities with prostitutes is being disallowed as an itemized deduction for medical expenses because these expenses are not deemed to be allowable medical expense deductions. Also, the expenses incurred are illegal in New York State. Illegal treatments cannot be included in medical expenses. In addition to being illegal in New York State, these expenses are not substantiated with receipts.”

The state tax appeals board agreed with the New York State Division of Taxation and the U.S. Tax Court in disallowing Halby’s deductions (see Tax Court Denies Medical Deduction for Prostitutes, Porn). “Similar to the Administrative Law Judge’s conclusion in the case before us, the Tax Court held that petitioner was not entitled to the deductions,” wrote the appeals board in its decision. “The Tax Court stated that patronizing a prostitute is illegal in New York and, thus, a taxpayer cannot claim a deduction for any illegal operation or treatment...Moreover, it was determined that the moneys paid for books and magazines on sex therapy and pornography were not for the treatment of a medical condition, but rather, were instead personal items.”

"The tax appeals tribunal totally ignored the presentation I made in my oral argument and in my brief," Halby told WebCPA. He noted that he has cited both Justice Antonin Scalia’s dissent in Lawrence v. Texas and the New York case of Cherry v. Koch, as well as another case called In Re P., which referred to an unnamed minor. "There was a judge involved in the New York case who said if this occurred between consenting adults in private, even if it was for pay and was not advertised or a case of street prostitution, then the constitutional provisions relating to the right of privacy would protect against prosecution," said Halby. "In effect the law prohibiting prostitution in New York would not apply in that situation. That argument was totally ignored by the tax appeals tribunal."

He added that the U.S. Tax Court had also ignored those arguments. Both also ignored other arguments, including a case where a Nevada writer who was researching a book on prostitution had not saved his receipts from making cash payments to interview prostitutes, but the court had found his presentation credible. Halby also argued that the Tax Court had recently approved another taxpayer's deduction for medical expenses for a sex change operation to relieve stress.


Halby has four months to appeal the state ruling to the appellate division, but he said he probably wouldn't because he doesn't expect the answer to be any different. He has also chosen not to appeal the federal Tax Court ruling because of the high cost of the bond.

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