Lawyer Loses Bid To Claim Over $100,000 in Deductions for Prostitutes and Related Expenses

gavel2Attorney William Halby has lost another effort to allow him to deduct his “medical” use of prostitutes from his taxes. He lost a claim of over $100,000 in deductions before the federal Tax Court.

The opinion is fascinating. The problem is that Halby’s use of prostitutes was neither doctor ordered nor legal in New York.

In the tax court’s opinion, Judge Goeke notes that Halby was as meticulous as he was amorous:

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.

In a remarkably deadpanned holding, the judge concludes:

We agree with respondent that petitioner is not entitled to deduct the amounts at issue. Patronizing a prostitute is illegal in the State of New York. See N.Y. Penal Law sec. 230.04 (McKinney 2008). N.Y. Penal Law sec. 230.02 (McKinney 2008) provides that a person is patronizing a prostitute when he:
(1) Pursuant to a prior agreement pays a fee for another person’s having engaged in sexual conduct with him; (2) agrees to pay a fee pursuant to an understanding that in return such person or a
third person will engage in sexual conduct with him; or (3) solicits or requests another person to engage in sexual conduct in return for a fee. Section 1.213-1(e)(1)(ii), Income Tax Regs., provides that a taxpayer is not entitled to a deduction for any illegal operation or treatment. 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. Sec. 1.213- 1(e)(1)(ii), Income Tax Regs.

This holding does raise the interesting question of whether tax deductions in Nevada (where prostitution is legal) can be deducted with a doctor’s note. Likewise, does this mean that a firm retreat or client evening at the Mustang Ranch can be deducted as a business expense?

Halby previously lost an effort at tax deduction for the second oldest profession, here. In that opinion, the court noted:

For the 2002 tax year, petitioner claimed a medical expense deduction of $105,271.00, after the 7.5% limitation on federal adjusted gross income (AGI). Included among the medical expenses claimed was an expense of $111,364.00, of which $40,588.00 was categorized on an attachment to Schedule A on petitioner’s federal return as “therapeutic sex”(1) and $70,776.00 as “massage therapy to relieve osteoarthritis and enhance erectile function through frequent orgasms.” Also included as part of the medical expense deduction claimed were the sums of $658.00 for medical books, videos and periodicals and $2,173.00 for “pornography to enhance sexual performance in lieu of taking Viagra.”

Oh, one last fact of interest. Halby is 77.

Halby was former counsel for the Equitable Life Insurance Society of the United States and reportedly continued to work as counsel with McMillan, Constabile, Maker & Perone. He may consider forming a new law firm over in New Jersey with Harold Hoffman. The firm of Hoffman and Halby might be small, but the annual firm retreat would be something not to be missed.

The recent opinion was first reported by taxprof (an excellent site run by Professors Paul Caron).

11 thoughts on “Lawyer Loses Bid To Claim Over $100,000 in Deductions for Prostitutes and Related Expenses”

  1. Dear Professor Turley:

    I have always admired your knowledge of constituional law, but you failed, just as the Tax Court did, to address the argument I made in my Tax Court brief that the New York statute against prostitution violates the due process and privacy areas of the Constitution as applied to consensual sex between adults conducted in private, whether or not paid for. See Justice Scalia’s dissenting opinion in Lawrence v. Texas, the New York Appellate Division decision in Cherry v. Koch, as well as Judge Taylor’s Civil Court decision in the New York case of In re P.
    Also, hisorian Rachel Maines’ book,The Technology of Orgasm (Johns Hopkins Press 199), says that it was standard medical practice for doctors to massage female patients to orgasm as a treatment for hysteria or sexual frustration, a practice which Professor Judy Kuriansky of Columbia University says is state-certified in California. And in Denmark the Government has approved the use of sex surrogates in nursing homes to relieve depression in lieu of drug therapy, a practice approved by Danish gerontologists.

  2. Therapy?

    No, no, no.

    Remember fascism rules and universal health care is for fools according to those (temporarily) in power. Think money is the best thing in the world. Think . . .

    Business deduction.

    A recurring expense in hiring a fungible service designed to properly regulate his mood and ergo provide a better defense for his clients. It’s analogous to the intensive light therapy machines for people who frequently travel overseas.

  3. I have to give this guy credit for being gutsy! I am amazed how much money he had available to him for these alleged therapy sessions.

  4. He could have conferred with Newt Gingrich, Dick Morris, Senator Vitter, Senator Ensign, and former Congressman Robert Livingstone, all men of the all-American, flag- waving, family values rightwinger political crowd on how best to handle the details.

  5. You know I was rethinking this. If Pink Studios was invited to the Newt Party shouldn’t this man be as well? This is a good and classic screwing. I just hope as he is in his 70’s that if they decide to criminally prosecute him that he does not get as screwed in jail. I like his creativity.

  6. First and foremost I must amend my returns and include them now as dependents. Oh, wait, I guess I need to call that Law Professor and ask about that. Do they have to be filed in order to claim them as a deduction? I forget, is it ADD or ADHD or what deficiency can I use as a defense? I am so confused now. Now if I have sex with a prostitute in Windsor or Nevada then I can legally claim it as a deduction for medical purposes. But if I claim them as a deduction in a state where prostitution then, I have criminally implicated myself as a prior written statement under oath.

    I think this big spender has some issues that need to be dealt with and they ain’t all sexual anymore. But then again, he may just have those jailhouse love sick blues.

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