This thread is mostly reminding me how transphobic this site can be.
The problem is people trying very hard to take offense where none was intended. This work was tagged futanari by the author. Tagging it futanari on this site (and not yuri) is perfectly sensible, because it describes the story most accurately.
Realize that 'yuri' is a genre, an established subset of story. It is not the Japanese word for 'lesbians'. Tagging this story futanari and not yuri is in no way a statement about real life trans women's ability to be lesbians, whether they still have their penises or not.