Finding items to deduct from tax returns is everyone’s goal.
Here are some not so typical things – courtesy of the U.S. Tax Court – that have been ruled deductible expenses in individuals cases. You may want to rethink your calculations to consider:
- Cat food: Samuel and Carol Seawright of Columbia, S.C. operated Columbia North East Used Parts, an auto salvage yard. They claimed $300 in cat food on their 1995 taxes, saying attracting wild cats deterred snakes and rats from their scrap yard. The Tax Court overruled the Internal Revenue Service and said they were entitled to the deduction as a business expense.
- Crashed truck: Justin Rohrs of California, who just two months after purchasing a $40,000 2006 Ford F-350 pickup truck, rolled the vehicle while under the influence of alcohol. Rohrs was on the way to his parents’ house, after getting a ride to and from a party to let the alcohol wear off, when he failed to negotiate a turn, sliding of an embankment. His blood-alcohol level was record as 0.09, 0.01 above the legal limit. His insurance company denied the claim due to his driving under the influence arrest, citing willful or gross negligence.. He claimed a $33,629 deduction on his 2005 taxes, which the IRS rejected. “We agree with petitioner that his actions did not amount to willful or gross negligence,” the Tax Court wrote in overruling the IRS. “While petitioner’s decision to drive after drinking was negligent, that alone does not automatically rise to the level of gross negligence.”
- Babysitting fees: June Kingsley paid for a babysitter so she could do volunteer work and then deducted the costs from her taxes. Babysitting is viewed by the IRS as a personal expense and rejected the charitable deduction as the money went to the sitter, not the charity. However, the Tax Court overruled saying that the babysitter fees allowed Kingsley’s charity work to occur.
- Beer: Edward J. Sullivan of Chickasha, Okla. had claimed $2,128 on his 1976 taxes and $1,066 on his 1977 taxes for “advertising and promotion” of his service station. Opting to replace S&H Green Stamps with free beer because many of his customers were field workers, Sullivan bought beer from various grocery and liquors stores and kept it in an old Coca-Cola vending machine he had bought. Free beer was offered with purchases. Sullivan said 95 percent of the beer was consumed by customers while filling up their vehicle or having their vehicle serviced, with the other 5 percent being drunk by employees after work. The IRS contended that the beer was not an allowable business expense in a “clear business setting” and knocked Sullivan’s advertising and promotion expenses to a combined $953 for the two years. Sullivan countered that his beer expenditure was “promoting good business” and not just general goodwill as the IRS had contended. The Tax Court sided with Sullivan, citing “he used this promotional technique to lure customers to his station to sell them gas, oil and other services. Anyone who traded with him was offered beer free of charge. There was plainly a direct relationship between the petitioner’s providing services and beer.” The Tax Court likened it to a hotel owner providing occasional free dinners at the hotel for a patron and allowed for Sullivan to deduct $1,981 for 1976 and $482 for 1977.
- Lighting: Henry and Patricia Langer claimed outdoor lighting costs for their home, where Patricia taught piano lesson since 1984 and Henry, a former IRS agent, operated a financial investigations business since 1996. The Langers claimed home office expenses and depreciation of the lighting for both businesses. The Tax Court allowed depreciation of the low-voltage outdoor lighting system installed in 1999 at a cost of $9,420. “Because there were substantial business and personal reasons for installing the lighting, its cost must be allocated in accordance with the petitioners business use of the residence” –5.7 percent for the piano business and 7.2 percent for the financial investigations business.
- Body oil: Corey L. Wheir of Wisconsin Rapids, Wis. deducted on his 1999, 2000 and 2001 tax returns a number of skin products to enhance his appearance as a professional bodybuilder. One product was ProTan Muscle Juice Professional Posing Oil, which, according to the instructions, was to be applied “prior to pumping up backstage for optimum effects.” Another product, Blow Out, was to be applied to the body five minutes prior to a workout. Still another product was to be massaged over the body several hours before a posing to provide a suntan brown color. The IRS claimed the expenses were personal in nature because the products could be used by bodybuilders and non-bodybuilders alike. The Tax Court overruled the IRS citing that the products were marketed only through bodybuilding publications and were not generally for sale through normal marketing outlets. “The fact that nonprofessionals may have used such products does not, in the court’s view, tip the scale against professional bodybuilders…,” the court said in its ruling. While there may be some doubt, the court concludes, on balance, that the scale tips ever so slightly in favor of petitioner.”
Sansone Accounting & Tax is a provider of accounting and QuickBooks services and keeps an eye on taxation issues for clients. Sansone is known for guiding clients through planning and preparation decisions to minimize tax liabilities and help increase business efficiency. Whether it is QuickBooks or new business taxes, the firm prides itself on being available to play a major role in supporting financial, record-keeping and tax-planning issues. To schedule an appointment with one of Sansone’s certified public accountants, call (815) 459-4300.