NY- from www.forbes.com – The issue before the tribunal, the judges wrote solemnly, was whether a taxpayer could claim a medical expense deduction “for amounts paid for erotic materials, sexually related publications, male enhancement pills, and miscellaneous services performed by prostitutes.”
The decision: Hell, no!
In a just-released 12-page opinion, New York State’s Tax Appeals Tribunal unanimously ruled that William G. Halby, a long-separated, 79-year-old retired tax lawyer from Brooklyn, could not deduct $296,495 from his state taxes for 2002, 2003 and 2004. The disallowed sum included $5,632 of bank and credit card charges.
Last year, we wrote about Halby’s efforts to get governments to subsidize his very active sex life. The U.S. Tax Court disallowed a $120,000 write-off on his federal taxes for 2004 and 2005. Halby had cited “the positive health effects of sex therapy.”
But the ruling said no doctor had prescribed that course of treatment for Halby and that in any event patronizing prostitutes was illegal in New York.
The court even hit Halby with a $4,000 accuracy-related penalty, saying the University of Michigan Law School graduate should have known better.
At the time, Halby told Forbes that he was pursuing “a holistic approach to medicine” to fight depression and that all the materials he had bought filled “shelf after shelf” in his tiny rent-controlled apartment.
By then, a New York State administrative law judge already had ruled against Halby’s efforts to claim the same break against his New York State income taxes, on largely the same grounds. The new Tax Appeals Tribunal decision affirmed that ruling, saddling Halby with a bill, including interest and penalties, for $23,000.
In an interview Thursday, Halby said there would be no appeal. “That’s it,” he said. Halby expressed frustration that neither the federal nor state court bothered to deal in writing with his claim that the U.S. Constitution afforded him a zone of privacy for consenting sexual activity even if for pay. “It was a serious issue,” he declared.
Certainly, Halby’s tax returns made for surprisingly racy reading. One year he deducted $41,000 for “therapeutic sex” and another $71,000 for “massage therapy to relieve osteoarthritis and enhance erectile function through frequent orgasms.” Also detailed were assorted sexual performance aids.
The New York panel reached the same outcome as the U.S. Tax Court for essentially the same reasons, but with one interesting difference. The federal judge found that Halby maintained careful records, even about services rendered by prostitutes, and “kept track of these visits in a journal.” The New York State judges found the paperwork wholly inadequate.
Halby said Thursday that after the U.S. Tax Court decision, he entered into a monthly installment payment plan with the Internal Revenue Service to resolve his sex-linked debt. But he said the New York State Division of Taxation and Finance could go pound sand for its $23,000.
“Under New York law, I am insolvent,” Halby said. “I have no assets. I rent. I live on a pension that can’t be seized.”