• Intacct Blog: The 10 Most Ridiculous Attempted Tax Deductions
  • The 10 Most Ridiculous Attempted Tax Deductions

    If Christmas is the most wonderful time of the year, tax season certainly falls on the opposite end of the spectrum for most. As many of you are likely filing your taxes today or still recovering from the paperwork involved, take a break and check out our quiz of 10 of the most ridiculous things individuals and business owners have tried to claim as tax write offs. Do you think they were successful or did the IRS make them pay?

    Walter White II
    It seems one gentleman decided to take what he viewed on the big screen into his everyday activities, à la Breaking Bad. This decision proved to be particularly unfortunate after a hot plate ignited his highly flammable chemicals and erupted into a fire that engulfed the building. The result? He felt this justified to claim a $9,000 casualty loss.

    Outcome: Even though he was involved in an illegal activity and acted negligently, the Tax Court allowed him to claim the write-off.

    Burn baby, burn
    Arsonist for hire, anyone? One struggling business owner sought the assistance of an arsonist to burn his furniture building down in hopes of collecting half of a million dollars in insurance money. He very greedily decided to tack on the $10,000 fee he paid to his arsonist while filing.

    Outcome: In addition to voluntarily tying himself directly to a criminal act, he did not get to collect his insurance money or receive approval for the tax write off on his burnt building. The good news is he constructs furniture for a living and we pay taxes annually - he could likely build himself a new store and get another chance at the tax filing thing again next year..hopefully without any criminalities listed.

    Daddy Warbucks
    It seems natural to want to help your offspring, yes? One particularly generous father decided to fund his teenage son’s motocross career via his lucrative real estate development business. Two years later, his son went pro and these kind donations came to a halt—but not until the teen had received a whopping total of $160,000 from dads sponsorships for his racing.

    Outcome: The Tax Court said that most of the $160,000 was a deductible business expense because the firm obtained new business connections, favorable construction financing deals, and other similar benefits from its sponsorship.

    All about that bass
    It can be costly to keep your skills finely tuned, yes? Particularly so for one bass player/music professor who often traveled to jazz rehearsals and performances so he could play with other well-known musicians.

    Outcome: The IRS said he could not deduct his travel costs and deemed his activities as a hobby. Nevertheless, the Tax Court allowed him the write-off because he used what he saw and heard and passed the knowledge along to his students.

    Here kitty kitty
    Being a cat lady often draws a negative connotation; but maybe not in this case. A very feline-friendly couple who owned a junkyard attempted to write off the cost of cat food and maintenance for housing an unusual number of cats on their property.

    Outcome: Because the cats also took care of snakes and rats that hid throughout the junkyard, making the place safer for customers, when the case reached the Tax Court, IRS lawyers conceded that the cost was indeed a valid tax deduction.

    Shine bright like a diamond
    Beauty is only skin deep right? Apparently your looks, or at least the cost of maintaining them, can be a matter that the IRS must handle. One pro bodybuilder relied heavily on body oil to make his hard-earned muscles glisten in the stage lights during his competitions. Additionally, he claimed buffalo meat and vitamin supplements were also necessities to maintain his enviable physique.

    Outcome: The Tax Court ruled that although he could deduct the cost of the oil as a business expense, he couldn’t muscle his way into legitimately writing off the buffalo meat and supplements.

    Period table dream team
    Despite what the periodic table might say, maybe alcohol and gas really do mix. When one gas station owner offered free beer with every tank fill-up, sales skyrocketed! But does this constitute a legitimate business expense to the IRS?

    Outcome: The IRS did indeed allow the owner to write off the cost of the beer as a business expense. Fill ‘er up!

    Gas and alcohol don’t mix
    On second thought, maybe gas and alcohol don’t mix..After one enthusiastic partier drank himself senseless, he still had the good sense to properly arrange for a ride home. His judgment ceased, however, mere hours later as he decided to go out for a spin—literally. The police arrested him after finding his car had spun off the road and rolled over. To top it off, he requested insurance pay for the damage to his car and wanted to write the cost of damage off when it came time to file his taxes.

    Outcome: Due to his arrest, the insurance company refused to pay for the car damage. Yet the Tax Court let him claim the cost of the damage as casualty loss by trying to act reasonably, all thanks to the designated driver giving him a ride home prior to him going out for his joyride. Only had he tried to drive straight home from the party would his actions have constituted gross negligence.

    Green thumbs
    One cultivation aficionado decided to list his marijuana crop as a deductible business expense. I imagine that very few drug dealers pay taxes, but as this young entrepreneur was already facing prison time, he didn’t want to risk having to serve more time for tax fraud. So, to be sure all the i’s were dotted and t’s crossed, he hired a CPA and recorded all his income prior to filing. (Seems difficult without any receipts or 1099s.)

    Outcome: In a surprise twist, albeit likely only to this young filer, the US government takes very little interest in your taxable income when you list a criminal activity in which they can simply seize your property outright. Tax deduction denied.

    Have your cake and eat it too
    The eight-piece jazz band, three-tiered butter cream cake, swan ice sculpture… It all adds up. One dad very generously signed on the dotted line for his daughter’s big day. When tax day came however, he tried to claim the lavish wedding as a business entertainment expense.

    Outcome: Apparently the IRS doesn’t count clinking champagne glasses with your manager as business entertainment if “I do’s” are involved. Hopefully they brought good gifts.

    I think we all commiserate in the frustration of the yearly chore of income taxes—it seems some just set the bar a little higher in what they’ll claim in hopes of getting an extra few dollars back.

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