IRS signals recognition of DPs as spouses, accepts deduction for sex reassignment surgery

by on November 21, 2011  •  In Family law

Professor Pat Cain's Same Sex Tax Law Blog reports three recent IRS pronouncements that have gotten little attention and should get more.

Most interesting, a letter from the office of Chief Counsel informs an Illinois taxpayer that different-sex partners in a civil union will be treated as husband and wife for purposes of filing a joint return, because the state law provides that civil union partners should be treated the same under the law as spouses. One logical conclusion is that in a post-DoMA world, same-sex partners in a civil union will also be treated as spouses. This will carry huge benefits for same-sex couples who want to marry but live in states that allow civil unions but not same-sex marriage, or who don't want to marry but who could benefit from that federal tax status. 

Earlier this month, IRS issued an Action on Decision acquiescing in a 2010 Tax Court decision (O'Donnabhain v. Commissioner) ruling that sex reassignment surgery is deductible as a medical expense. Previously, SRS was treated as cosmetic surgery, which is not deductible.

Lastly, in late October, IRS published guidance clarifying that for same-sex spouses or civil union partners, a partner's child is considered a stepchild for federal tax purposes.

Must have been an interesting few months at the IRS… 

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