statute as synonymous with "a physical or mental defect or illness." The language equating "mental defect" with "disease" was in the first version of the regulations promulgated in 1943 and has stood unchanged since. See T.D. 5234, 1943 C.B. 119, 130. In addition, to qualify as "medical care" under the regulations, an expense must be incurred "primarily" for alleviation of a physical or mental defect, and the defect must be specific. "[A]n expenditure which is merely beneficial to the general health of an individual, such as an expenditure for a vacation, is not an expenditure for medical care." Sec. 1.213-1(e)(1)(ii), Income Tax Regs.

Given the reference to “mental defect” in the legislative history and the regulations, it has also long been settled that "disease" as used in section 213 can extend to mental disorders. See, e.g., Fischer v. Commissioner, 50 T.C. 164, 173 n.4 (1968) ("That mental disorders can be 'disease' within the meaning of [section 213(d)(1)(A)] is no longer open to question."); Starrett v. Commissioner, 41 Commissioner, 41 T.C. 877 (1964); Hendrick v. Commissioner, 35 T.C. 1223 (1961).

In Jacobs v. Commissioner, 62 T.C. 813 (1974), this Court reviewed the legislative history of section 213 and synthesized the caselaw to arrive at a framework for analysis of disputes concerning medical expense deductions. Noting that the medical expense deduction essentially carves a limited exception out of the general rule of section 262 that "personal, living, or family expenses" are not deductible, the Court observed that a taxpayer seeking a deduction under section 213 must show: (1) "the present existence or imminent probability of a disease, defect or illness-mental or physical" and (2) a payment "for goods or services directly or proximately related to the diagnosis, cure, mitigation, treatment, or prevention of the disease or illness." Id. at 818. Moreover, where the expenditures are arguably not "wholly medical in nature" and may serve a personal as well as medical purpose, they must also pass a "but for" test: the taxpayer must "prove both that the expenditures were an essential element of the treatment and that they would not have otherwise been incurred for nonmedical reasons." Id. at 819,26

26 Applying the foregoing principles, the Court in Jacobs v. Commissioner, 62 T.C. 813 (1974), concluded that the expenses of the taxpayer's divorce, even though the divorce was recommended by the taxpayer's psychiatrist and was beneficial to the taxpayer's mental health,

C. Definition of Cosmetic Surgery

The second prong of the statutory definition of "medical care", concerning amounts paid "for the purpose of affecting any structure or function of the body", was eventually adjudged too liberal by Congress. The Internal Revenue Service, relying on the second prong, had determined in two revenue rulings that deductions were allowed for amounts expended for cosmetic procedures (such as facelifts, hair transplants, and hair removal through electrolysis) because the procedures were found to affect a structure or function of the body within the meaning of section 213(d)(1)(A). See Rev. Rul. 82-111, 1982-1 C.B. 48 (hair transplants and hair removal); Rev. Rul. 76–332, 1976–2 C.B. 81 (facelifts); see also Mattes v. Commissioner, 77 T.C. 650 (1981) (hair transplants to treat premature baldness deductible under section 213).

In 1990 Congress responded to these rulings by amending section 213 to include new subsection (d)(9) which, generally speaking, excludes cosmetic surgery from the definition of deductible medical care. See Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508, sec. 11342(a), 104 Stat. 1388471. A review of the legislative history of section 213(d)(9) shows that Congress deemed the amendment necessary to clarify that deductions for medical care do not include amounts paid for "an elective, purely cosmetic treatment". H. Conf. Rept. 101-964, at 1031 (1990), 1991-2 C.B. 560, 562; see also 136 Cong. Rec. 30485, 30570 (1990) (Senate Finance Committee report language on Omnibus Budget Reconciliation Act of 1990). 27

were not deductible medical expenses because the divorce would have been undertaken even absent the taxpayer's depression.

27 The bill as initially passed in the House of Representatives did not include a provision addressing cosmetic surgery; this provision originated in the Senate. The report of the Senate Finance Committee, which was informally printed in the Congressional Record, contrasted "cosmetic" procedures with "medically necessary procedures" as follows:

For purposes of the medical expense deduction, the IRS generally does not distinguish between procedures which are medically necessary and those which are purely cosmetic.

*** Expenses for purely cosmetic procedures that are not medically necessary are, in essence, voluntary personal expenses, which like other personal expenditures (e.g., food and clothing) generally should not be deductible in computing taxable income.

Section 213(d)(9) defines "cosmetic surgery" as follows:

SEC. 213(d). DEFINITIONS. For purposes of this section—

(A) IN GENERAL.-The term "medical care" does not include cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease.

(B) COSMETIC SURGERY DEFINED.-For purposes of this paragraph, the term "cosmetic surgery” means any procedure which is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or dis

ease.

In sum, section 213(d)(9)(A) provides the general rule that the term "medical care" does not include "cosmetic surgery" (as defined) unless the surgery is necessary to ameliorate deformities of various origins. Section 213(d)(9)(B) then defines “cosmetic surgery" as any procedure that is directed at improving the patient's appearance but excludes from the definition any procedure that "meaningfully [promotes] the proper function of the body" or "[prevents] or [treats] illness or disease". There appear to be no cases of precedential value interpreting the cosmetic surgery exclusion of section 213(d)(9). 28

II. The Parties' Positions

Respondent contends that petitioner's hormone therapy, sex reassignment surgery, and breast augmentation surgery are nondeductible "cosmetic surgery or other similar procedures" 29 under section 213(d)(9) because they were directed at improving petitioner's appearance and did not treat an illness or disease, meaningfully promote the proper function of the body, or ameliorate a deformity. Although respondent

*** [U]nder the provision, procedures such as hair removal electrolysis, hair transplants, lyposuction [sic], and facelift operations generally are not deductible. In contrast, expenses for procedures that are medically necessary to promote the proper function of the body and only incidentally affect the patient's appearance or expenses for the treatment of a disfiguring condition arising from a congenital abnormality, personal injury or trauma, or disease (such as reconstructive surgery following removal of a malignancy) continue to be deductible * * *.

28 Al-Murshidi v. Commissioner, T.C. Summary Opinion 2001-185, construed sec. 213(d)(9) but was decided under sec. 7463 and may not be treated as precedent. See sec. 7463(b).

29 Respondent contends that petitioner's hormone therapy was a "similar procedure" within the meaning of sec. 213(d)(9)(A).

concedes that GID is a mental disorder, respondent contends, relying on the expert testimony of Dr. Dietz, that GID is not a disease for purposes of section 213 because it does not arise from an organic pathology within the human body that reflects “abnormal structure or function of the body at the gross, microscopic, molecular, biochemical, or neurochemical levels." Respondent further contends that the procedures at issue did not treat disease because there is no scientific proof of their efficacy in treating GID and that the procedures were cosmetic surgery because they were not medically necessary. Finally, respondent contends that petitioner did not have GID, that it was incorrectly diagnosed, and that therefore the procedures at issue did not treat a disease.

Petitioner maintains that she is entitled to deduct the cost of the procedures at issue on the grounds that GID is a wellrecognized mental disorder in the psychiatric field that "falls squarely within the meaning of 'disease' because it causes serious, clinically significant distress and impairment of functioning." Since widely accepted standards of care prescribe hormone treatment, sex reassignment surgery, and, in appropriate circumstances, breast augmentation surgery for genetic males suffering from GID, expenditures for the foregoing constitute deductible "medical care" because a direct or proximate relationship exists between the expenditures and the "diagnosis, cure, mitigation, treatment, or prevention of disease", petitioner argues. Morever, petitioner contends, because the procedures at issue treated a "disease" as used in section 213, they are not "cosmetic surgery” as defined in that section. 30

III. Analysis

The availability of the medical expense deduction for the costs of hormonal and surgical sex reassignment for a transsexual individual presents an issue of first impression.

30 Petitioner also argues that the expenditures for the procedures at issue are deductible because they affected a structure or function of the body (within the meaning of sec. 213(d)(1)(A)) and were not "cosmetic surgery" under sec. 213(d)(9) because they were not "directed at improving the patient's appearance" and because they "meaningfully [promoted] the proper function of the body" (within the meaning of sec. 213(d)(9)(B)). Given our conclusion, discussed hereinafter, that the expenditures for petitioner's hormone therapy and sex reassignment surgery are deductible because they "[treated] *** disease" within the meaning of sec. 213(d)(1)(A) and (9)(B), we need not resolve the foregoing issues with respect to those expenditures. We consider petitioner's arguments with respect to the breast augmentation surgery more fully infra.

4

A. Statutory Definitions

Determining whether sex reassignment procedures are deductible "medical care" or nondeductible "cosmetic surgery" starts with the meaning of “treatment” and “disease” as used in section 213. Both the statutory definition of “medical care" and the statute's exclusion of "cosmetic surgery" from that definition depend in part upon whether an expenditure or procedure is for "treatment" of "disease". Under section 213(d)(1)(A), if an expenditure is “for the * * * treatment *** of disease", it is deductible "medical care"; under section 213(d)(9)(B), if a procedure "[treats] *** disease”, it is not “cosmetic surgery" that is excluded from the definition of "medical care", 31

Because the only difference between the quoted phrases in these two subparagraphs is the use of the noun form "treatment" versus the verb form "treat", we see no meaningful distinction between them. "Code provisions generally are to be interpreted so congressional use of the same words indicates an intent to have the same meaning apply". Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 241 (2002); see also Commissioner v. Keystone Consol. Indus., Inc., 508 U.S. 152, 159 (1993); United States v. Olympic Radio & Television, Inc., 349 U.S. 232, 236 (1955); Zuanich v. Commissioner, 77 T.C. 428, 442-443 (1981). Consequently, the determination of whether something is a "treatment" of a "disease" is the same throughout section 213, whether for purposes of showing that an expenditure is for "medical care" under section 213(d)(1)(A) or that a procedure is not "cosmetic surgery" under section 213(d)(9)(B). A showing that a procedure constitutes “treatment” of a “disease" both precludes "cosmetic surgery" classification under section 213(d)(9) and qualifies the procedure as "medical care" under section 213(d)(1)(A). 32

31 As noted, respondent contends that petitioner's hormone therapy is a "similar procedure" within the meaning of the sec. 213(d)(9)(A) exclusion from "medical care" of "cosmetic surgery or other similar procedures". Respondent does not contend, however, that the hormone therapy's status as a "similar procedure" within the meaning of sec. 213(d)(9)(A) ipso facto causes the therapy to be excluded from "medical care". Instead, by arguing that the hormone therapy was directed at improving petitioner's appearance and did not treat an illness or disease, respondent concedes that a "similar procedure" as used in sec. 213(d)(9)(A) is delimited by the definition of "cosmetic surgery" in sec. 213(d)(9)(B)—that is, that a "similar procedure" is excluded from the definition of "medical care" if it "is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease". 32 The parties have stipulated that petitioner did not undertake hormone therapy or sex reassignment surgery to ameliorate a deformity arising from, or directly related to, a personal injury