On medicle and protection fees

Even thought this is a bit of a weird tax case, it is interesting that USA is more reasonable than Canada when it comes to medical expenses. And even more interesting is that “protection fees” are tax deductible in Canada.
See this article below written by Michael Herman.
Dan White

danwhite@danwhite.ca

Weird Cases: tax deductable sex

The US Tax Court has recently ruled that money spent on prostitutes and pornography is a not tax deductible expense, even for a New York lawyer.

William G Halby, an established Brooklyn tax lawyer, submitted to the Internal Revenue Services a range of expenses he wanted deducted from his tax liability as “medical expenses”. Under section 213 of the Internal Revenue Code, expenses for medical care can be deducted from a tax liability if the care was for the “diagnosis, cure, mitigation, treatment, or prevention of disease” or for the purpose of “affecting any structure or function of the body”.
Halby argued that his sex expenditure was made both to treat disease and to improve some aspects of his anatomical functionality. He did not skimp when buying his medicine. In 2002, for example, he sought to deduct $111,364 from his tax liability for money spent on “therapeutic sex” in order to “relieve osteoarthritis and enhance erectile function through frequent orgasm”.

In 2005, his claim for tax deductions included $5,005 for sex books, magazines and videos, and $42,152 for prostitutes. For tax purposes, Halby kept a record in his personal journal of all visits to his “service providers” and of all the literature and equipment he bought including a claim for condoms and – unprecedented in American tax law cases – a claim for “nipple clamps”.

When almost all of his claims were refused, Halby brought a case against the Commissioner for Internal Revenue in the Tax Court. Judge Goeke noted that none of the alleged sex therapy had been prescribed by a doctor. In any event, he ruled, patronising a prostitute is illegal in New York and you cannot claim tax deductions for illegal medical treatments. Similarly, the pornography was for Halby’s “general welfare” not on prescription for any specific ailment.

While lawyers cannot claim expenses when they hire prostitutes, prostitutes can claim expenses when they hire lawyers. In 1964, the Court of Exchequer in Canada had to decide which of the expenses of running a call girl business in Vancouver were tax deductible. A claim for $1,925 for the business paying its lawyers was allowed by the court. Law courts are good places in which to plead the universal necessity of lawyers.

However, the court did gently reject a separate claim from the call girl business to reduce its tax liability by another $16,500 – the money it had paid to police as “protection fees”.

Professor Gary Slapper is Director of the Centre for Law at the Open University. English Law, by Slapper & Kelly, is published by Routledge-Cavendish.

Posted by Michael Herman on September 25, 2009 in Weird Cases |

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