A Sex-change lawyer, who faces jail for embezzling #16,634 from clients' accounts, poses a problem for the Scottish Prison Service, which must decide on where to send Alexandra MacRae who is legally a man but physically a woman.

MacRae's career lies in ruins after she admitted the offences yesterday at Dundee Sheriff Court. The SPS played it cautiously yesterday, pointing out that while they did not discuss individual prisoners, the watchwords would be compassion and humanity.

Should MacRae, a former front-row forward for Stornoway Rugby Club, be jailed, she would face a medical examination on entry to Perth Prison, the reception jail for Dundee courts. The medical team there is, by coincidence, female.

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It is then highly likely the SPS would follow the lead of the English Prison Service, which has more experience of what is termed gender dysphoria in the world of penology.

Their policy is to house gender dysphoric prisoners as far as possible in an establishment which most suits their personal sexual orientation. Scotland's female prison is Cornton Vale at Stirling but it is more likely MacRae would be housed in one of the tiny female units at the male prisons at Dumfries, Aberdeen or Inverness.

Safety would be paramount. The English work on the assumption anyone who has received a sex-change operation will already have lived for two years as a member of the opposite sex and will have received two years counselling.

The prison service then has discussions with the prisoner's specialist who carried out the operation. The English admit, however, that ''transsexuals are likely to have difficulties adapting to prison life'' and they often have to be located in health-care units.

MacRae, 55, disappeared in January this year, sparking a seven-week police hunt before her arrest by British Transport Police in London's King's Cross station.

Two weeks after her disappearance, the Law Society appointed a judicial factor to run her practice in Victoria Road, Dundee, and the embezzlement came to light.

Yesterday, MacRae looked pale and anxious in court. She specialised in immigration law and working for ethnic minority groups but has now been struck off by the Law Society of Scotland.

Sentence was deferred until January 6 for reports but, in the current crackdown climate on lawyer fraudsters, a prison sentence is extremely likely.

MacRae, who stood as an SNP candidate both as a man and a woman, has rarely been far from controversy during her career.

Originally known as Stephen Rae, the six-foot Dundee minister's son went to school in Dundee and Paris before taking a law degree at Edinburgh University, where he was president of the student nationalist club. He was a voluntary worker in Ghana for two years before returning to Scotland and a career in local government.

He then took up a job with Falkirk council before moving to the Western Isles, where he was appointed the council's director of administration in Stornoway. During his time there, he played for Stornoway Rugby Club and was married to a Ghanaian nurse called Bibi, by whom he had no children.

However, he provoked controversy when he arrived at his next council job, in Inverness, dressed as a woman and describing himself as Miss Alexandra MacRae.

MacRae later took up a post as head of law at Angus Council and also developed an interest in politics.

She contested four parliamentary elections for the SNP, three as a man and one as a woman. During the 1992 General Election, she stood in Provan and talked about the sex-change operation she had undergone in a Glasgow hospital.

She said: ''If I hadn't finally received medical help, I don't know what I would have done. I probably wouldn't be here now. It's something you have to go through otherwise life is unbearable.'' She told then how she had first sought medical help as a teenager and said: ''This has nothing to do with sex, it is to do with gender.

''I am a transsexual. It's a disability and it's a disability I would rather have done without.''

Last night, an SPS spokesman said: ''Technically, if you are born male, you are always regarded as male in the eyes of the law. But we deal with all prisoners with humanity and care.

''It is part of our mission statement to accord all prisoners humanity and we deal with each one as an individual. We will need to wait and see the outcome of the case, before we decide anything.''

MacRae, 56, admitted embezzling the cash between July 11 and November 30 last year. She gave her address as Castleford Road, Sparkhill, Birmingham.

A spokesman for the Law Society said yesterday: ''When this matter came to the attention of the Law Society earlier this year, the society took steps to prosecute Miss MacRae before the Independent Scottish Solicitors discipline tribunal.

''She was found guilty of professional misconduct and as a result was struck off the roll of practising solicitors.''

MacRae stole almost #17,000 from the account of an overseas client when her law firm ran into financial diffculties.

She was struck off by the tribunal last May, after admitting taking the money from a foreign client who wanted to buy property in Glasgow.

To cover her steps, MacRae issued bogus fee notes. The tribunal's findings note: ''She acknowledged she had wrongly taken money to pay her firm's debt.

The tribunal noted ''her financial difficulties were largely attributable to her own failure to put her practice on a sound financial foundation''.