TTax season is once again upon us. So, for a lighter look at a serious situation, we decided to cover at all the creative ways that business people have kept Uncle Sam’s greedy hands away from their pocketbooks.
Crazy Yet Legal
As it turns out, companies and private citizens can get away with a lot when it comes to business-related expenses. Companies giving away free beer to prospective customers and writing it off on their taxes are clearly the tip of the iceberg here.
An exotic dancer was even able to deduct $2,088 from her taxes so she could get breast implants. The courts ruled that her enhanced cleavage was a stage prop and therefore was a legitimate expense. The same was probably true for the professional bodybuilder who deducted the price of the oil that he used to cover himself with during competitions.
Another incident involved a couple who bought a private plane so that they could regularly check in on their rental property and subsequently wrote it off on their taxes. The expense was approved as long as the plane wasn’t being used for a recreational purpose, allowing the business to operate at an even greater loss than it had before.
Then there was the guy who tried to get away with paying his live-in girlfriend to help him out with his business. The court allowed that deduction but refused to let him pay her for cleaning their shared property.
Perhaps the most outlandish story involves a dairy farmer who deducted the cost of his African safari. The trip was deemed acceptable by the IRS because it involved lots of animal-related activities. On the other hand, attending business conventions in exotic locations is generally considered a tax-deductible expense.
The Darker Side of Things
If you are running a business, you generally must follow the local and state laws. This oversight caused problems for a guy who gave his clients the gift of whiskey and wrote it off on his taxes. The IRS said it wasn’t an appropriate entertainment expense. It also violated state laws. Ouch. Another guy more understandably had the same problem with a racehorse that he said he’d bought to entertain his clients at the track. The government also told him to pay up.
Perhaps one of the more ironic rules on the books is that criminals must pay annual taxes on their illegally acquired gains. Yet you can’t deduct any business expenses if your career choice (such as prostitution or growing weed) is illegal in your home state or province.
However, one particularly foolish criminal takes the cake here. He thought he would deduct the cost of the arsonist he had hired to burn down his company so that he could collect the insurance. It’s no surprise that he was caught in the process.
The only way your pets are going to legally be able to be written off as a business expense is if they perform a vital service to your company. Examples of this would be cats that protect farms from rodent related damages and dogs that serve as junkyard protection systems. Even so, if you have moved in order to take a new job, you are generally allowed to count the cost of moving your pets to their new home as well.
A Final Note
Some people count their profitable hobbies as businesses on their taxes and this is usually fine. But if your company doesn’t turn much of a profit and it has operated at a loss for several years, you may end up being red-flagged by the IRS for an audit since that falls in line with what they consider a hobby rather than a functional business.
Image Credit:stevepb via Pixabay.