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March 2017 Tip of the Month

Hey, if Abo and Company can lighten up during tax season…so should you

WE DON’T WRITE THE TAX RULES…WE JUST HELP INTERPRET THEM

A colleague/friend of Marty Abo, Jay MacDonald, is a contributing editor for Bankrate.  In compiling his annual Craziest Tax Deductions story for Bankrate, Jay again reached out to Marty for some of his wackier examples.

Marty told of his dialogue with a client for his aggressiveness in wanting to deduct certain "therapeutic" expenditures he felt should qualify as medical expenses.  To that end Marty cited for the client a Tax Court Memorandum from 2009 (Halby v. Commissioner).  In that case a Brooklyn tax attorney tried to deduct AS MEDICAL EXPENSES approximately $121,000 over a two year period for expenditures he shelled out for prostitutes, pornographic publications and related finance charges. He did keep detailed records of his visits (i.e. date, name of the “service provider”, publications or other items, etc.) thinking he would at least meet the substantiation rules for proper support. He felt all of these expenses qualified based on their positive health benefits. Alas, the Tax Court maintained that the Internal Revenue Code does not sanction deductibility for illegal operations or treatment as well as the prostitute visits were not prescribed by a physician nor intended to treat a particular medical ailment. Similarly, the pornographic publications and similar items he purchased were disallowed as unrelated to the treatment of a medical condition.

The tax attorney who was divorced, semi-retired and living alone in A Bay Ridge apartment was quoted in the press at the time "I was depressed. I live a solitary life. I have no social life. I needed that release." Halby said he found his "sex surrogates" - preferably brunettes - through ads in The Village Voice and sometimes visited them several times a week. "Over the years, I've been with dozens of girls for full-body massage with . . . happy ending," he said. All told, Halby spent about $322,000 to satisfy his desires, according to court papers.

Of course, we’re really not sure how the Court would have ruled had the taxpayer paid for these treatments in Nevada where we understand prostitution is legal (not that Marty would know) and he had obtained a note from a doctor for such. 

As an aside, Marty does recall mentioning this case to a very seasoned matrimonial attorney colleague (who often offers to represent Jane pro-bono) and this nameless divorce lawyer responded "Shoot Abo, under that theory then I should be able to deduct the Chanel handbag I drool over. You have no idea how excited I get just thinking about it."