I was having lunch with my accountant today to review what I had to do with his preparation of my tax return. We get a fairly early start on this as it takes me a lot of time to come up with the papers he needs. It's not that I'm disorganized; it's just that I may be too organized. I tend to scrutinize each scrap of paper and I am constantly asking whether I can deduct for this or for that.
In fact, my wife and I recently moved into a new home and I questioned whether I could deduct the cost of transporting my cats to the new home as a legitimate moving expense. My accountant looked at me suspiciously.
But as I got to thinking about it, with the tax season now upon us, I wondered what was really going on about tax deductions; in other words, what are people trying to get away with? So I called the National Association of Tax Practitioners and asked if they might be able to share with me the various creative ideas people have come up with to claim deductions.
First of all, one taxpayer wanted to know if she could deduct her late husband's cremated ashes as a write-off because the funeral director seemed to have lost the ashes. So, was it a casualty loss deduction? You know the answer to that one? Casualty losses are for losses from fire or theft.
Next, consider this guy in Hollywood, Florida, whose home was raided by the authorities and found to contain 334 grams of coke, gold and silver coins, jewelry, and $7,000 in cash and weapons. The guy was persuaded to agree to a sting operation in exchange for a probated sentence. He also agreed to pay $80,000 for expenses of police undercover work. Later, he repurchased the coins and jewelry from his home for $90,000. When he filed his income tax return, he deducted the $80,000 as a charitable donation to the police department and the $90,000 as a casualty loss.
The IRS didn't appreciate this. The judge ruling in the matter said that a charitable donation is a transfer of money or other asset without receiving any consideration in return. The guy received something in return; he didn't go to jail. On the $90,000 the judge pointed to earlier cases where courts refused deductions for assets forfeited because of illegal narcotics activities.
Then there are people who have tried to deduct false teeth, dentures, and even items of clothing. What am I talking about? Take the actor who had some heavyweight dental work to get rid of a lisp or the lady with the Givenchy clothing so she could look her best at work.
Of course, the classic one involved Chesty Morgan from Detroit. She was a stripper who claimed her breast implants as a medical expense. It was widely reported because a tax court judge allowed her to write off the operation as an un-reimbursed business expense.
Finally, before the IRS mandated that parents and legal guardians must provide a Social Security number for their children in order to take them as dependents on the return, a lot of people were putting in all kinds of names. Actually, once that rule went into effect, the number of dependents claimed dropped like a stone--a decrease of seven million. Why? Because people had been deducting their pets.
No names mentioned here.
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