Federal Individual Taxation: Research Memo assignment – costs of sex reassignment surgery

One of your clients, Anne McDonald, is a transgender woman who underwent sex reassignment surgery and incurred costs of $28,750. These payments were not compensated by insurance or otherwise. Anne asks you whether or not she can deduct these expenses as itemized deduction medical expenses on Schedule A or if they are considered cosmetic surgery.

Anne grew up in an Irish Catholic family and previously tried to conform to traditionally masculine roles, enrolling in the United States Coast Guard, working as a construction worker, marrying and fathering three children. Conflicted by gender identity issues, she divorced and was diagnosed with gender identity disorder. This condition, recognized in the DSM-IV (APA manual of mental disorders), is when a person identifies as belonging to a different gender than one usually corresponding to the sex they were assigned at birth, and feels significant discomfort or the ability to deal with this condition.

Requirements:

1. Review the applicable tax law. Start with the appropriate code section in the Internal Revenue Code (IRC), including the appropriate subsection and paragraph. 
2. Find at least one court case that has similar facts and supports your conclusion to Anne’s question. (The facts will likely be similar but not exact).
3. Prepare a memorandum communicating your conclusions to Anne. This memorandum should follow the format from Step 5 of page 2-25 of the text.  The memo should be between 500-1,000 words. The memorandum should include proper citing of the Internal Revenue Code and the case you located -- see Chapter 2 for a discussion of the proper citing of tax law and tax cases.

The best way to locate appropriate cases is to use the LexisNexis Academic database available on the Holman Library Website (LexisNexis is included on the list of Journal Article databases). Once on the LexisNexis search page it helps to click on “cases” so you can focus on “Federal Cases.” While the applicable tax code section can be found on LexisNexis (through “Tax Law”) more general Internet searches could also be used as a starting point for this. I have found the best way to find cases is to search LexisNexis using the applicable tax code section, subsection, and paragraph that pertains to your question. Search words can be used but I have found this to be less efficient. Surprisingly (?), the IRS website is not usually helpful when looking for primary source materials to give appropriate authority to your conclusions.