Tax season is in full swing and people are looking at their return and wondering about deductions they should include.  This month we are going to talk about tax deductions that are bit unusual but have been successfully deducted.   Some are a bit ridiculous and others are down right hilarious.  During such a stressful time, we wanted to provide some funny anecdotes.  

Free Beer, Anyone?

A service-station owner decided a good promotion for his business would be to offer his customers a free beer with a fill-up.   It is no surprise that gas sales increased considerably.  The Tax Court allowed the owner to deduct the cost of the beer as a business expense.  Looks like alcohol and gasoline do mix! 

Film Making

A lawyer had invested six years making a documentary film on a musical group.   The IRS tried to claim that the long series of annual losses indicated that this film was more of a hobby then a documentary film.  The judge reviewing the case attempted to suggest that documentary filmmaking is not-for-profit by nature.   This suggestion was so disturbing that several well-known filmmakers filed friend-of-court rulings saying that you can make money with documentaries. 

The court eventually ruled in her favor and allowed the deduction of the six-figure losses.  Furthermore it was noted that she acted in a businesslike manner – hiring staff including a bookkeeper, she bought insurance, consulted experts and even changed the story line in order to make the film more marketable, she also blogged about the film and submitted it to film festivals.

Babysitting Charges

According to the Tax Court, fees paid to a babysitter to enable a parent to get out of the house to do volunteer work for a charity are deductible as charitable contributions.

Landscaping Your Home

A sole proprietor who regularly met with clients in his home office was allowed to deduct part of the cost of landscaping the property.  Based on the fact that it was part of the home being used for business.  The Tax Court also allowed a deduction for part of the costs of lawn care and driveway repairs.

 New Pool

After a doctor told a man with emphysema to develop an exercise regimen, the man put a pool in his home.  He swam twice a day and improved his breathing capacity.  He swam in the pool more than anyone in his family.  The Tax Court allowed him to deduct the cost of the pool as a medical expense, because the main purpose of the pool was for medical care.  The cost of heating the pool, pool chemicals and a portion of insurance for the pool were are also treated as medical expenses. 

Tax season is in full swing and people are looking at their return and wondering about deductions they should include.  This month we are going to talk about tax deductions that are bit unusual but have been successfully deducted.   Some are a bit ridiculous and others are down right hilarious.  During such a stressful time, we wanted to provide some funny anecdotes.  

Charitable Donation

A woman used her own money to care for feral cats.  She fostered them in her home for a charity that specialized in neutering wild cats.  She spent more than $12,000 paying vet bills, food and other items.  A Tax Court allowed her to claim the charitable deduction, but limited her write-off because she failed to meet the substantiation rules.  This means she failed to get a contemporaneous acknowledgement from the charity each time she spent over $250 on the charity’s behest.  If she had received acknowledgement from the charity she could have deducted all her costs.

Body Builders and The Oil They Use

            A professional body builder used body oil on his muscles to make them glisten during his competitions. Tax Court ruled he could deduct the cost of the oil because it was a business expense.  They would not allow him to deduct foods and vitamins that he used to enhance strength and muscle development.

Paying for Wrongdoing?

An insurance company sued two doctors for insurance fraud.  The doctors admitted liability and agreed to reimburse the insurer for the losses.  The IRS ruled that the repayments are deductible as long as the doctors originally included the money in their incomes the prior year.  They didn’t get off too easy though.  The IRS said the repaid funds are a miscellaneous itemized deduction that’s allowed only to the extent it exceeds 2% of the doctors adjusted gross incomes.

Wreck a Car While You Are Drunk?

A man who drank too much at a party arranged a ride home.  A few hours later, that same man, after giving the drinking a rest thought he would be okay to drive home.  Unfortunately, his vehicle slid off the road and rolled over.  He was arrested for drunk driving; his blood alcohol was just above the legal limit.  His insurer refused to pay for the damage to the car because of the arrest.  But the Tax Court let him deduct the cost of the damage as a casualty loss. Because he said that he had tried to act reasonably.  Had he driven straight home with a higher blood alcohol content and had the accident, they would have rejected his write-off.

Barking Dogs

A self-employed consultant working in her condo sued her neighbors and the Condo HOA, alleging that her work was disrupted by noise from faulty construction and barking dogs.   She attempted to deduct $26,000 in legal fees as business expenses.  The IRS said the legal fees were a personal cost. But the Tax Court approved half the write-off because she used 50% of the condo for business.  The IRS also failed to prove that the noise didn’t adversely affect her business use.

Tax season is in full swing and people are looking at their return and wondering about deductions they should include.  This month we are going to talk about tax deductions that are bit unusual but have been successfully deducted.   Some are a bit ridiculous and others are down right hilarious.  During such a stressful time, we wanted to provide some funny anecdotes.  

Drug Lab Burns Down

            A man bought a building that was previously used by a religious sect.  He decided to use the building as a drug lab.  Unfortunately a hot plate ignited his chemicals and a fire burned down the building.  Although the building (which was probably used for cooking meth,) had been used for an illegal activity, he claimed he was entitled to a $9,000 casualty loss.  Even though he acted negligently and was using the building for an illegal drug lab, the Tax Court allowed him to take the write off.

Supporting Your Child’s Career

            A father owned a successful real estate development company and his son was a motocross racer and a local celebrity.  The father decided to sponsor his son’s racing activity and over the course of 2 years his business spent $160,000 in equipment and other costs.  Tax Court allowed the father to deduct almost the entire amount as a business expense.  Since the firm acquired new business, new connections and favorable deals the sponsorship was tax deductible.

Music Professor Plays the Bass

            An accomplished musician and music professor attempted to deduct his travel expenses for jazz rehearsals and performances.  His reasoning was that he needed to keep his skills sharp for performances with other well-known musicians.  The IRS said he could not deduct these costs since performing wasn’t part of his teaching duties.  But a Tax Court allowed the deductions because he used what he learned in the music scene to teach his students.

Lets Buy a Plane

            A couple owned a rental condo about 6 hours away from their home, but instead of driving or taking the only commercial flight available to visit the condo, they bought their own plane.  The Tax Court allowed them to deduct their condo-related trips – including cost of fuel and depreciation for the time the plane was used for business related purposes.

Cat Food

            A couple who owned a junkyard were allowed to write off the cost of cat food.  They would set the food out to attract wild cats.  They needed the cats to get rid of snakes and rats in the junkyard, which made it safer for customers.  Tax Court conceded that the cost of food was deductible.

If you are looking for a professional to help you prepare your taxes, let us give you some suggestions on what to look for. There are hundreds of tax preparers out there, some make grandiose promises of large tax returns and others do not follow the rules set by the IRS. These mistakes could potentially make filing your taxes incredibly difficult and expensive. Let us help you avoid problems.

Hornstein Financial focuses on tax preparation, but we wanted to give you some tips on finding and hiring a tax professional.

It is important to check out tax preparers carefully before hiring one. Do not fall for promises of huge refunds. It really becomes a ‘consumer, beware’ world.

In dealing with tax preparers, here are three tips you should consider:

1. Get a copy of your return. If the preparer then alters the return after you’ve signed off on it, that’s proof that it was a false return that was filed.

2. Make sure the preparer’s name, registration number and address are on the return.

3. Check with the Better Business Bureau or state consumer affairs agency to see if there are any complaints against the preparation firm or preparer.

It may seem like a lot of work at first. But if you get sucked into one of these preparer issues it can take over a year to get it resolved. Also, once you find someone you trust you can use their services every year without worry.

Let Hornstein Financial help. Give our office a call with any questions or concerns 818.887.9401