Back in 2005 when the IRS released CCA 200603025 stating that gender reassignment surgery is not a deductible medical expense, I objected. Gender identity disorder had been recognized by the medical profession, I argued, so why should the IRS rely on a Catholic Church authority who had fought against such surgery for its decision. Read the post from 2006 here.
The Tax Court ruled on the issue today, in O'Donnabhain v. Comm'r, 134 T.C. No. 4 (Feb. 2, 2010). As Caron notes on TaxProf (hat tip), the majority recognized gender identity disorder as a disease and gender reassignment surgery as treatment for a disease (though they thought breast augmentation surgery was merely cosmetic).
Good decision, except maybe for that bit about breast augmentation being merely cosmetic. If we were talking about "Hot Lips" on Mash I'd agree. Or even about any woman who just wants bigger breasts. But when the subject is a male with gender identity disorder who is undergoing genital and breast surgery to make himself into the female she believes herself to be, then breast augmentation is a critical part of the picture, which the medical standards quoted in the case make clear. I couldn't read the court's discussion of this topic without thinking--but, if you had undergone that surgery, wouldn't it be pretty important to have really good breasts? The court essentially said there wasn't enough substantiation that the breast surgery was because of the gender identity disorder. One of the examining physicians who concluded that the petitioners was a "good candidate" for the surgery also noted that she already appeared to have developed decent breasts (B cup) under hormone therapy. Yet the surgery is described as "designed to make petitioner's breasts, which had experienced some development as a result of feminizing hormones, more closely resemble the breasts of a genetic female." An expert testified how important it is for persons with this disorder to "pass' convincingly in public as female." That does not sound like elective, purely cosmetic surgery to me, but something that is a singificant part of the change in the gender appearance of the individual-- something that "prevents or treats illness or disease"--i.e., a medically deductible expense. The court concluded that the petitioner hadn't shown that the breast surgery "treated" the gender disorder. It seems there was some lack of substantiation, since the recommending physician had not specifically discussed presurgical breast condition. But I suspect the court is giving more weight to an examining physician's statement of "significant breast development" than it should--that could merely mean "compared to a man without hormone treatment" but nowhere near normal female breasts. In fact, the physician that had noted presurgical "nice shape" also testified that he meant--compared to other males on hormones and not compared to ordinary female breasts. That didn't sway the court that there was enough substantiation to support that breast surgery was because of the gender disorder.
By the way, reading this from the context of a "battle of the experts" is interesting. One government "expert", Dr. Schmidt, was one who has not had a very important role in the matter since the 1980s (not a listed author on articles, not an author of a chapter in a medical reference text on the subject, but had "participated in evaluation" of about 12 gender disorder patients a year). He tried to have it both ways--unconvinced about the validity of the gender identity disorder diagnosis at this trial, yet testying regularly in other trials (recently) about the diagnosis and admitting that it is taught at medical schools and is something doctors are required to learn about. The summary of his testimony reads like what one would expect a creationist to say on a stand to defend the teaching of creationism--hedging and more hedging around the fundamental admission of the disorder, the medical consensus around it, and the real basis for it. The other government expert was a forensic psychiatrist--odd choice. He claimed that gender identity disorder is a mental disorder but not a disease because it isn't clear that it arises from a pathological process within the body (in spite of the fact that others have suggested at least three different conditions for disease--either discomfort, or dysfunction or pathology). So bulimia, to Dr. Dietz, is not a disease, and obsessive-compulsive disorder wouldn't have been one til it was discovered that it has a pathological cause about 20 years ago. The tax court concluded that the government's position against treating gender identity disorder as a disease was "meritless", with no authority whatsoever other than the one expert's interpretation, which "is flatly contradicted by nearly a half century of caselaw." Id. at 37. Further Dr. Schmidt's claims that the disorder is subject to some debate was found unconvincing, since the court was persuaded by "the widespread recognition of the condition in medical literature" showing that recognition of the disorder "is the prevailing view." Even these government witnesses undermined the government's claim that the disorder was merely a "social construction" since they agreed that it is a serious condition "sometimes associated with autocastration, autopenectomy and suicide." Id. at 43.