Crazy Tax Deductions—Part 2 of 2

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.'

4)  Beer vs. Whiskey:

Here's one that got a thumbs up and a thumbs down.

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!

Crazy Tax Deductions That Didn't Work—Part 1 of 2

It's that time of year again…at least here in the U.S.  Deadline for filing 2018 taxes is Monday, April 15, 2019!

Each year tax payers have tried to take the craziest deductions and have even pursued the matter in tax court where the IRS denied the deductions.  However, with the new tax laws in effect for filing your 2018 taxes, some things have changed.  But, prior to the current filing of 2018 taxes, here are ten of the zanier deduction attempts.

1)  Overdone Overdrafts:

A couple trying to keep their dry-cleaning businesses from going under had been denied business loans by their bank who had judged them to be a bad credit risk.  They came up with a plan to ease their cash flow problems.  They regularly overdrew their bank account and would pay the overdraft when the bank called.  This ended up costing them more than $30,000 a year in overdraft charges which they deducted from their taxes as a business expense.  The Tax Court denied the write-off, stating that the charges were unreasonably high.

2)  Red Blood Cell Depletion Allowance:

Because of her rare blood type, a woman made more than $7,000 in one year as a blood plasma donor.  She tried to offset the additional income through a tax deduction, claiming a depletion for the loss of both her blood's mineral content and her blood's ability to regenerate.  Depletion is a proper write-off for firms that remove deposits of minerals such as coal and iron ore from the ground.  The Tax Court ruled that individuals cannot claim depletion on their bodies.

3)  Prostitutes And Porn:

A tax lawyer spent more than $65,000 a year on prostitutes and pornographic materials which he deducted as a medical expense.  He stated the positive health effects of sex therapy.  The Tax Court denied the write-off saying his conduct was illegal and also wasn't the treatment for a medical condition.

4)  Burning Down The House:

A man relocated his family to a new state after a job transfer.  His wife didn't like the new location and returned home with the kids.  He visited over a holiday weekend and discovered another man had been living with her.  They argued and she left the house at which time he put some of her clothes on the stove and set them on fire.  It got out of control and burned the house down.  He claimed a casualty loss deduction and the Tax Court denied it saying they could not allow him to deduct a loss from a fire he set.

5)  Hush Money:

A pro football player got into an altercation with a lady friend at the time that he was in the process of negotiating a contract extension.  She filed a criminal complaint against him.  The team owner said if the matter became public, they would cut or trade him.  He agreed to pay her $25,000 to keep things quiet and he got his four-year contract extension.  When he tried to take the payout as a tax deduction, the Tax Court said the payment was a result of a personal relationship rather than a business expense.

6)  Designer Clothes:

The manager of a designer label boutique was required to purchase and wear the designer's clothing as a condition of her job to project the image of an exclusive life style.  A court denied her deduction because the clothes could be worn outside work regardless of the fact that they were not her personal taste of clothing. [Several decades ago when Dinah Shore had her weekly television variety show, she deducted several gowns she had worn on her show as a business expense. The IRS claimed they weren't business as she could wear them to social functions having nothing to do with her television show. Her counter argument was that they were not useable for anything else as she could not even sit down in them. The IRS had her put on each of the gowns and prove that she couldn't sit down. She couldn't sit in them and the IRS relented.]

7)  Las Vegas Gambling Junket:

A repo company sponsored a bus trip to Las Vegas in an effort to drum up business from banks.  The people talked informally about the collection business, but everyone spent most of the weekend gambling and no formal meetings were scheduled.  The trip was very successful and the repo company got a lot more business from the attendees.  However, the Tax Court denied them the deduction of the cost of the junket because the business discussions were only a small part of the trip.

8)  Meals With Colleagues:

A partner in a law firm met every day with his colleagues at lunch to discuss the firm's business.  Unfortunately, the IRS denied the deduction for the meals as being a business expense.  The law firm took it to Tax Court where the court agreed with the IRS that the meals were a non-deductible personal expense.

9)  Wrecking A Rental Car:

Heavy fog had an airline employee stranded who needed to get to New Orleans.  He worked out a deal with a rental car company to take one of their cars that they needed driven to New Orleans.  The company would have the car transported without having to pay a driver and he would get to New Orleans with no charge for the rental car.  Unfortunately, he wrecked the car in Mississippi and had to pay for damages.  When he tried to deduct the payment as a casualty loss, the Tax Court denied the deduction because he wasn't the owner of the car.

10)  Shoddy Construction:

A couple paid a builder to construct their home.  Shortly after they moved in, they found a series of problems with the house that made living there impossible.  They deducted a large theft loss on their taxes, claiming the builder defrauded them.  The Tax Court denied it stating they were the victims of poor workmanship rather than fraud.

Next week in Part 2, I'll be sharing some more strange deductions that didn't work along with some equally weird deductions that the IRS actually accepted.

24 Historical Quotes That Proved To Be Very Wrong

There are the statements made, then there is the reality that follows.  Here is a list of 24 historical quotes probably believed when they were first spoken but have since been proven to be very wrong.

24)  "There is not the slightest indication that nuclear energy will ever be obtainable.  It would mean that the atom would have to be shattered at will."

  --Albert Einstein, 1932

23)  "We don't like their sound, and guitar music is on the way out."

  --Decca Recording Company on declining to sign the Beatles, 1962

22)  "This 'telephone' has too many shortcomings to be seriously considered as a means of communication.  The device is inherently of no value to us."

  --Western Union internal memo, 1876

21)  "Reagan doesn't have that presidential look."

  --United Artists executive after rejecting Reagan as lead in the 1964 film THE BEST MAN.

 

20)  "Train travel at high speed is not possible because passengers, unable to breathe, would die of asphyxia."

  --Dr. Dionysius Lardner, 1830

19)  "I think there is a world market for maybe five computers."

  --Thomas Watson, chairman of IBM, 1943

18)  "X-rays will prove to be a hoax."

  --Lord Kelvin, President of the Royal Society, 1883

17)  "Everyone acquainted with the subject will recognize it as a conspicuous failure."

  --Henry Morton, president of the Stevens Institute of Technology, on Edison's light bulb, 1880

16)  The horse is here to stay but the automobile is only a novelty—a fad."

  --The president of the Michigan Savings Bank advising Henry Ford's lawyer not to invest in the Ford Motor Co., 1903

15)  "Television won't last because people will soon get tired of staring at a plywood box every night."

  --Darryl Zanuck, movie producer, 20th Century Fox, 1946

14)  "No one will pay good money to get from Berlin to Potsdam in one hour when he can ride his horse there in one day for free."

  --King William I of Prussia on trains in 1864

13)  "There is no reason for any individual to have a computer in his home."

  --Ken Olson, president, chairman and founder of Digital Equipment Corporation (DEC), in a talk given to a 1977 World Future Society meeting in Boston

12)  "If excessive smoking actually plays a role in the production of lung cancer, it seems to be a minor one."

  --W.C. Heuper, National Cancer Institute, 1954

11)  "No, it will make war impossible."

  --Hiram Maxim, inventor of the machine gun, in response to the question "Will this gun not make war more terrible?" asked by Havelock Ellis, an English scientist, 1893

10)  "The wireless music box has no imaginable commercial value.  Who would pay for a message sent to no one in particular?"

  --Associates of David Sarnoff responding to the latter's call for investment in the radio in 1921

9)  "There will never be a bigger plane built."

  --A Boeing engineer after the first flight of the 247, a twin engine plane that held ten people

8)  "How, sir, would you make a ship sail against the wind and currents by lighting a bonfire under her deck?  I pray you, excuse me, I have not the time to listen to such nonsense."

  --Napoleon Bonaparte, when told of Robert Fulton's steamboat, 1800s

7)  "The idea that cavalry will be replaced by these iron coaches is absurd.  It is little short of treasonous."

  --Comment of Aide-de-camp to Field Marshal Haig, at tank demonstration 1916

6)  "I must confess that my imagination refuses to see any sort of submarine doing anything but suffocating its crew and floundering at sea."

  --HG Wells, British novelist, in 1901

5)  "The world potential market for copying machines is 5000 at most."

  --IBM, to the eventual founders of Xerox, saying the photocopier had no market large enough to justify production, 1959

4)  "It'll be gone by June."

  --Variety Magazine on Rock n' Roll, 1955

3)  "And for the tourist who really wants to get away from it all, safaris in Vietnam."

  --Newsweek, predicting popular holidays for the late 1960s 

2)  "When the Paris Exhibition [of 1878] closes, electric light will close with it and no more will be heard of it."

  --Oxford professor Erasmus Wilson

1)  "A rocket will never be able to leave the Earth's atmosphere."

  --New York Times, 1936

Right now, somewhere in the world, there is a prominent person making a statement about some new emerging innovation that will give future generations a good chuckle.

9 All Time Unsolved Mysteries

A while back I saw a list titled 9 All Time Unsolved Mysteries.  The items listed…well, some were a surprise that they made an All Time list and I was curious about some that were left off the list.  This list consisted only of places and things with no mention of specific people.  I guess that explains why the mystery of Jack The Ripper's identity (actually, he was identified by a DNA match a few years ago), what happened to Amelia Earhart, and exactly who took that ax and gave Lizzie Borden's parents all those whacks didn't make the list.

Two of the items on the list were new to me—the Chase Vault and the Taos Hum.  I've been to Taos…didn't hear about this mystery and didn't hear the hum.

So, confusion in hand about what made the list and what didn't, I present—in no particular order—9 All Time Unsolved Mysteries.

9)  ATLANTIS—location unknown

Myth or reality?  The lost continent from ancient times [rather than the current Caribbean resort :) ] is one the world's favorite legends.  Most of what we know about Atlantis comes from the Greek philosopher Plato who wrote about it approximately 2000 years ago although the story of the ancient civilization places its time at 9000 years prior to that.  He described Atlantis as a huge island where brave and virtuous people…a highly advanced civilization…lived in a kind of paradise.  He placed its location west of the Pillars of Hercules, known today as the Straits of Gibraltar.  The story claims that the physical disappearance of the actual island came as a result of a massive earthquake or volcanic eruption that caused it to sink into the ocean.  To this day debate continues about whether Atlantis was real or myth and people continue to literally search all over the world for the remains of the lost continent with several locations declared to be Atlantis.

8)  ANTIKYTHERA MECHANISM—Greece

Discovered in October 1900 in a shipwreck off the coast of the Greek island of Antikythera, this machine contains the oldest known complex gear mechanism…sometimes referred to as the world's first analog computer.  It's estimated to have been made in the first century B.C. and appears to have been constructed on theories of astronomy and mathematics.  The device is believed to be made from a bronze alloy of 95% copper and 5% tin, but its advanced state of corrosion from having been in the ocean for almost 2000 years has made it impossible to perform an accurate analysis.  It's precise functions have not been scientifically confirmed.

7)  THE CHASE VAULT—Barbados

This mystery begins in 1808 in Barbados when the wealthy Chase family purchased an 80 year old vault to inter their dead relatives.  At the time they acquired the used vault, it contained only one occupant—Thomasina Goddard.  Col. Thomas Chase made the decision not to disturb Goddard, so she was not moved to another vault.  Shortly after that, young Mary-Anne Maria's body was added to the vault.  Then 4 years after that, the vault was opened to inter her sister's body.  Only a month after that, Col. Thomas himself passed away.  And that's when the legend takes hold.  Coffins had moved, some were standing on end.  Vandals were blamed.  Everything was returned to its original position and the vault once again closed and sealed.  From then on, every time the vault was opened to admit another coffin, the vault's contents would be in disarray, including Col. Thomas' heavy casket which took 8 men to lift.  No seals had been broken, no evidence of illegal entry into the vault, no evidence inside the vault of anyone being there as the sandy floor was undisturbed with no signs of flooding or earthquake.  The Chase family bodies were eventually moved to other burial sites in the cemetery and all incidents stopped.

6)  NAZCA (NASCA) LINES—Peru

The Nazca Lines were discovered by accident when a small airplane flew over the arid Peruvian coastal plains in 1927.  More lines were discovered nearby at the end of the 1980s.  The lines depict animals and geometric forms, many of them several kilometers in length with some of them only recognizable from an airplane.  The most outstanding shapes depict the figures of a spider, monkey, dog, small lizard, hummingbird, condor, and what appears to be an astronaut.  The lines were scratched into the desert between 500 B.C. and 500 A.D.  They are believed to have had ritual astronomical functions.  Others believe they were meant as sign posts for ancient extraterrestrials.  UNESCO named the Nazca Lines an Archaeological World Heritage Site in 1994.

5)  EASTER ISLAND—Chile (South Pacific)

Roughly 64 square miles in area and located in the South Pacific approximately 2,300 miles from Chile, Easter Island was named by Dutch explorers in honor of the day they discovered it in 1722.  It was annexed by Chile in the late 19^th century.  The mystery of Easter Island centers around the almost 900 giant stone figures that are centuries old and are distinctive from other stone sculptures found in various Polynesian cultures.  The purpose of the statues, how they were constructed and transported is still a matter of speculation.  Today, Easter Island's economy is based on tourism.

4)  TUNGUSKA EXPLOSION—Siberia

June 30, 1908, a mighty explosion occurred in this remote area of Siberia.  It was 1927 before a scientific expedition investigated the site.  They found 800 square miles of remote forest ripped apart, 80 million trees on their sides in a radial pattern.  They acted as markers pointing directly away from the blast's epicenter.  When the members of the expedition arrived at ground zero, they found the trees standing upright but all the limbs and bark had been stripped away, resembling a forest of telephone poles.  This phenomenon was seen again 37 years later at another massive explosion in Hiroshima, Japan, at the end of World War II.  More than a century after the Tunguska Explosion there is still debate over the cause, but the generally agreed upon theory is that a space rock approximately 120 feet across entered the atmosphere above Siberia at about 33,500 miles per hour, heated the surrounding air to 44,500 degrees Fahrenheit and self-exploded at an altitude of about 28,000 feet producing a fireball and releasing energy equivalent to 185 Hiroshima atomic bombs.  The majority of the asteroid was consumed by the explosion so there was no impact crater.

3)  PIRI REIS MAP—circa 1513

The Piri Reis Map is often cited as proof that civilization on Earth was once very advanced then for unknown reasons disappeared with man only now gaining any understanding of this mysterious cultural decline.  In addition to the map's historical interest, it contains details that no European could have known in the early 1500s.  The Sumerians in Mesopotamia are the earliest known civilization and appeared on the scene apparently from out of nowhere around 4000 B.C. but had no nautical or maritime cultural heritage.  Piri Reis' own commentary indicates some of his source maps in creating his map were from the time of Alexander The Great (332 B.C.).  The map shows that the makers knew the accurate circumference of the Earth to within 50 miles.  The depicted coastline and island shown in Antarctica are as they were prior to 4000 B.C. when they were ice free.  Debate continues with no clear answers of how Piri Reis could have created such an accurate map at that time.

2)  TAOS HUM—New Mexico

The Taos Hum is a low-pitched mechanical buzzing sound often heard in Taos, New Mexico.  Not everyone can hear it, but those who do say it's driving them crazy.  Apparently it begins suddenly as if someone had turned on a switch, never abates, interferes with their sleep, and is more noticeable inside the house than outside.  In 1993 residents requested that Congress carry out an investigation into the source of the hum, but no specific causes were uncovered.  In 1997, Congress asked various scientists from several elite research institutes to look into it.  So far, no concrete facts have been uncovered to prove exactly what is causing the hum or what it is that allows some people to hear it and others to not hear it. 

1)  SHROUD OF TURIN—Italy

There is intense debate among scientists, theologians, historians, and researchers about the origins of the shroud and its image.  The shroud is housed in the royal chapel of the Cathedral of Saint John the Baptist in Turin, Italy.  It is a linen cloth showing the image of a man who appears to have suffered physical trauma of the type consistent with crucifixion.  This image is commonly associated with Jesus Christ, his crucifixion and burial.  In 1988 a multi-national scientific group did a radiocarbon dating test on small samples of the shroud and concluded that the samples they tested dated from the Middle Ages, between 1260 A.D. and 1390 A.D.  Since 2005, at least four articles have appeared in scholarly publications stating the cloth samples used were not representative of the whole shroud.  The shroud continues to be a much studied and controversial artifact.

Are there any unsolved mysteries of place or thing that you think should have been on this list?

The History of Mardi Gras and the Tradition Of Flashing

This year Mardi Gras falls on Tuesday, March 5, 2019.  In the Catholic Church, it's Shrove Tuesday, also known as Fat Tuesday.  The date for Mardi Gras depends on the date of Easter—always occurring forty-six days before Easter.

In the most literal sense, the Mardi Gras celebration is the three days prior to the start of Lent on Ash Wednesday.  It's the last opportunity for partying and indulgence in food and drink.  In practice, Mardi Gras—or Carnival, as it is called in many countries—is usually celebrated for a full week before the start of Lent.

Celebrations take place all over the world with the most famous modern day festivities being in New Orleans, Louisiana; Rio de Janeiro, Brazil; Nice, France; and Cologne, Germany.

Even though Mardi Gras is a Christian festival, it dates back to the pre-Christian spring fertility rites and embodies many of the traditions of the ancient Greeks and Romans.  In the early Middle Ages, after converting pagan tribes to Christianity, the Catholic Church was still unable to abolish all the ancient traditions.  To combat this, the Church ended up taking many ancient feasts and festivals originally celebrated in honor of pagan gods and adapted them to Christian beliefs.  An example of the pagan roots—today revelers on parade floats still dress as Bacchus, the Greek god of wine.

The first Mardi Gras celebration in the United States was near modern day New Orleans on March 3, 1699, but it was the mid 1800s before parade organizations, known as krewes, came into being.  The first Mardi Gras parade was held in New Orleans on February 24, 1854, by the Krewe of Comus.  They began the tradition of a parade with floats followed by a ball for the krewe and their guests.  The official colors of Mardi Gras were chosen by Rex, King of Carnival, in 1892 and given their meaning—purple for justice, green for faith, and gold for power.

But what about that popular activity that has become a seemingly integral part of the New Orleans Mardi Gras, much to the chagrin of the festival purists?  Women pulling up their shirts and flashing their bare breasts to procure some worthless plastic beads?

Exactly where did this tradition come from?

Well, first of all, it's not really a tradition.  It's more along the lines of what has become a traditional activity in the same vein as getting stupid drunk and passing out now seems to fall into that same 'traditional' category.  Over the years more and more media attention has been directed toward the drunken revelry that occurs on Bourbon Street which has helped in defining flashing as a traditional part of the Mardi Gras celebration.

Fortunately, or unfortunately depending on your point-of-view, flashing in exchange for beads is mostly limited to the New Orleans' French Quarter.  And even in the French Quarter, it's an illegal activity.  Women flashing their bare breasts run the risk of being arrested.

Maybe flashing is not a true tradition, but you can't deny that it has become a custom.  After all, the history of wild Mardi Gras behavior comes from celebrating the last day before Lent—Lent being a time of atonement.  And this naturally lends itself to activities of excess and craziness.

Which apparently has come to include flashing.

 

But there is one crazy excess even more daring than the momentary baring of the female breasts known as flashing.  And what, you may ask, could possibly be crazier than flashing and still be done in public?  And the answer is having clothes painted on your bare skin.  There are artists who specialize in this.  It probably started as something simple and basic like face painting but has grown to include full body artistic renderings.  At a casual glance, it appears that the person is clothed (albeit skin tight clothing).  But on closer inspection, you discover that's far from the truth.  Some of these examples shown below are basic and others are quite elaborate.