The Tax Court has denied a Brooklyn tax lawyer’s attempt to claim over $100,000 in payments for prostitutes and pornography as medical expense deductions.

In the case, William G. Halby v. Commissioner of Internal Revenue, Judge Joseph Robert Goeke noted, “During 2004 and 2005 petitioner frequented prostitutes in New York. 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.”

Halby, 78, a retired tax attorney who occasionally consults for the firm McMillan, Constabile, Maker & Perrone, claimed medical expense deductions of $76,314 on his Schedule A for 2004 and $49,203 for 2005. The IRS issued a notice of deficiency for 2004 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 $47,024 disallowed for 2005 included $5,005 for books, magazines, videos, and pornographic materials; and $42,152 for prostitutes.

The judge agreed with the IRS that Halby was not entitled to deduct the amounts at issue. “Patronizing a prostitute is illegal in the State of New York,” he wrote, adding, “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.”

The court upheld the IRS’s determination that Halby pay $21,491 in back taxes and $4,298 in accuracy-related penalties. Halby also lost a case last September in 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 that he intended to file a motion for reconsideration of the findings of opinion on constitutional grounds. He noted that the judge's ruling 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."

Halby also cited cases such as Lawrence v. Texas and Cherry v. Koch in his brief, and he noted that in some European countries such as Denmark, Germany, and Switzerland, the treatment he received would be considered medical in nature. He also has an appeal pending before the New York State tribunal. He does not expect either the federal or state appeals to come up for consideration until next year.


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