Can Charlie Sheen Deduct His Hookers?

March 1, 2011 -- If Charlie Sheen, come April 15th, tries to deduct his hookers from his taxable income, he won't be the first man to try. William G. Halby has bravely blazed that trail before him.

The retired Brooklyn lawyer's deductions for prostitutes, massages, pornography and other sex-related activities were claimed as "medical expenses." Halby's disallowed deductions included $40,588 for "therapeutic sex," $70,776 for "massage therapy to relieve osteoarthritis and enhance erectile function through frequent orgasms" not to mention $2,173 for "pornography to enhance sexual performance in lieu of taking Viagra."

Patronizing a prostitute, the tax court somberly noted, is illegal in New York. Neither Halby nor any other taxpayer can claim a deduction for an illegal treatment (no matter how "therapeutic"). The court, however, did affirm Halby's right to deduct $6,308 in doctor visits, prescription drugs and other medically-justified services.

Every tax season has its odd and shameless deductions. Recent doozies have included:

Arson. A Pennsylvania owner of a failing furniture store hired an arsonist to burn it down, and up it went in smoke. The deceived insurance company paid off. On his tax return, the fraudster dutifully recorded the $500,000 payment from the insurer; but, not content with that, he then tried to write off as a "consulting fee" the $10,000 he had paid the arsonist. It was a claim too far. The IRS smelled a rat, and the shopkeeper was fined $6,000 went to jail.

Thong underwear. An Ohio TV news anchor claimed as her work-related deductions teeth whitening, manicures, pedicures, gym fees, clothing, dry cleaning, self defenses classes, subscriptions to Glamour and Cosmopolitan, and lingerie--including thongs--some of it purchased from Victoria's Secret. Her claimed deductions came to $167,356 in all. The U.S. Tax Court ruled against her, judging them to be personal expenses.