Here are some more zany tax deductions that didn't work…and
some equally zany ones that did. And a
few deductions where the CPA preparing the taxes offered an opinion before the
taxpayer filed the forms.
Here's some that were rejected by the IRS.
1) Burning Down The Business:
A furniture store owner had unsuccessfully tried for years
to sell his business. He finally hired
an arsonist and collected $500,000 in insurance money. But things went bad for him when he tried to
deduct the $10,000 he paid the arsonist as a "consulting fee." Both men ended up in prison.
2) Did She Tango Her Way Home:
A taxpayer was denied a deduction for dance lessons which
she claimed would improve her varicose veins.
The reason for the rejection? The
IRS claimed the lessons were not medically necessary, the ruling also extending
to dance lessons for arthritis and nervous disorders.
3) Fido's Babysitting:
Millions of household dogs in the U.S. are left home alone
each day. One taxpayer hired someone to
come to his house and watch his dog while he was at work then he tried to
deduct the expense using the same rules intended for children and legal
dependents. The IRS said no way.
One that got a thumbs up and a thumbs down.
4) Beer vs. Whiskey:
A gas station owner gave his customers free beer and took
the cost as a tax deduction. On the
other hand, a businessman tried to deduct several cases of whiskey he gave to
clients as an entertainment expense. Tax
Court ruled that the beer deduction was allowed but the whiskey deduction was
denied. [Makes no sense to me, or anyone
else for that matter other than the Tax Court judge who made the ruling]
And here are some surprise rulings in favor of the taxpayer.
5) Dairy Cows On Safari:
The owners of a dairy farm tried to write off an African
safari as a business expense claiming that some of the dairy's promotional
efforts included wild animals. Even
though the concept of wild dairy cows
is a bit far-fetched, the IRS actually allowed the deduction.
6) Come By For A Swim:
An emphysema patient was told by his doctor that he needed
to start exercising. So, the patient
installed a swimming pool at his home and deducted it as a necessary medical expense.
Even though they turned down the deduction for the tango lessons, the
IRS allowed the swimming pool deduction including the cost of various
chemicals, cleaning, heating and upkeep.
7) Here, Kitty-Kitty-Kitty:
Junkyard owners had a nasty snake and rat problem. In an attempt to combat it, they set out
bowls of pet food each night to attract the feral cats that roamed the
area. The cats ate the pet food and also
the snakes and rats. Since the cats made
the business safer for customers and employees, the IRS allowed the deduction
for the pet food.
8) The Bigger…The Better:
An exotic dancer wrote off the cost of breast implants,
claiming it was a business expense since bigger breasts equaled bigger
tips. The IRS agreed, saying the
implants were a stage prop essential to her act.
And finally, some strange deductions the tax preparer ruled
on before the taxpayer filed the forms with the IRS.
9) Carrier Pigeons:
A tax payer was so distrustful of technology that he wouldn't
use a computer or even a phone. So, he
used carrier pigeons to communicate with his business partner across town. He also thought it made sense to deduct all
his expenses for the care, feeding, and housing of the carrier pigeons as a
business expense. After determining that
the businessman had not used technology for communication in the past, the CPA
preparing his taxes decided the deduction was fair. No word yet on whether the IRS agreed.
10) A Baby:
A businesswoman tried to deduct the cost of her own baby as
a business expense. She used photos of
the baby in marketing materials for her business and believed the money she
spent on her baby's food, clothing, nanny, diapers and baby powder—a total of
about $26,000 for the year—should all count as business expenses. The CPA doing her taxes wrote off the cost of
hiring the photographer who took the photos of the baby as well as the baby's
stroller and clothing items that carried the company logo which pictured the
baby, but she informed her client that the rest of the expenses were not
allowed.
11) Hip Replacement For A Dog:
A woman dropped off her tax information to her tax
preparer. He noticed an unusually high
amount for medical expenses including $8,000 for a family dependent even though she had no spouse or children. The family dependent turned out to be her
dog. Because the animal wasn't a medical
necessity for the taxpayer, he couldn't let her deduct the cost of the surgery
or any of the dog's other expenses.
12) Pole Dancing Lessons:
A man tried to write off the cost of his wife's pole dancing
lessons as a business expense under meals
and entertainment. The man claimed
watching her dance was his after work relaxation and made him better at his
job. His tax preparer informed him that the
IRS would swiftly deny the $800 deduction.
13) $1,000 Worth Of Evian Water:
A very wealthy woman convinced her doctor to give her a
prescription for three bottles of Evian water (specifying the brand) every day
and declared $1,095 as a medical deduction on her taxes for the water. Her CPA said that since she still had the
prescription note in her files showing it had been prescribed by a doctor it
was a permissible expense even though the doctor's note didn't disclose what
her medical condition was that required three bottles of Evian water every day.
14) Spanx Shapewear:
A real estate agent who was a little bit big on the bottom (according to her tax preparer)
bought several pairs of the Spanx brand slimming underwear because she thought
looking smaller would help her sell more houses. Her tax preparer told her there was no proof
the Spanx had any impact on her business or income, therefore, it couldn't be
considered a legitimate business expense.
15) Recreational Drugs:
One financial planner had a rock band client actually try to
deduct an item labeled drugs as a
Travel & Entertainment expense. The
total cost of the drugs was in the
high five-figures. The band's bookkeeper
claimed the cost of recreational drugs was necessary and ordinary. Setting aside the fact that possession of the
recreational drugs was illegal, the tax preparer advised the band that the IRS
would never allow the deduction.
And on that note…Happy Tax Day to everyone!
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