By Ken Berry, Esq.
Doggone it! A taxpayer in a new case, a New York attorney, deducted the cost of dog food for her pooch and other pet expenses before the IRS unleashed its wrath. The case is currently muzzled due to some technical issues, but it seems that this deduction, like others that border on the ludicrous or outrageous, has been stopped in its tracks.
Previously, we covered several unusual deductions that were approved by the courts or the IRS, but here are 10 that didn’t make the grade.
1. Up in smoke. A business owner paid $10,000 to an arsonist to burn down the building of his failing business and deducted the payment as a “consulting fee.” This deduction was torched by the Tax Court.
2. Food for thought. Generally, expenses incurred. to alleviate a health condition qualify for a medical deduction, subject to the usual limits. But a diabetic taxpayer could not deduct the cost of specialized foods that merely replaced regular food consumption.
3. Wedding bell blues. The owner of a business deducted the entire cost of his daughter’s wedding as a business entertainment expense because a handful of clients were invited. This was not business entertainment! (Note: Business entertainment expenses are no longer deductible.)
4. Bursting the bubble. In New Jersey, a homeowner deducted the cost of a “bubble of pure air” system as a medical expense. Unfortunately, the IRS poked major holes in her argument.
5. Gimme tax shelter. The IRS has said that the cost of a fall-out shelter or panic room can’t be deducted as a medical expense. These are personal protection expenses and not preventative costs for medically necessary purposes.
6. Talk is cheap. A taxpayer who acted for a living tried to deduct the cost of dentures that enabled him to enunciate better. The Tax Court characterized this as a personal expense, not an ordinary and necessary business expense.
7. A tax misstep. A physician recommended that a taxpayer take dance lessons to help with arthritis and anxiety. However, the Tax Court said the cost wasn’t specific “medical care” that qualified as deductible treatment.
8. The breaking point. Deductions aren’t allowed for personal items that are broken during a move. Thus, the Tax Court denied claims for glassware and china dropped by movers and cocktail and other glasses broken by domestic help.
9. A Doggie Bed and Breakfast. A taxpayer paid to board his dog so he could travel getting his fledgling business up and running. But the Tax Court disallowed the boarding expense as a deductible business expense.
10. Murder, he wrote. A CPA spent millions of dollars having private investigators find out if his father’s death was a murder. But the IRS didn’t allow him to deduct the cost as a business expense—it was a personal endeavor akin to a hobby.
Lesson to be learned: Keep your clients in check during this tax filing season. Provide the guidance they need in “gray areas” on their personal and business returns.
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