Americans are known to bristle come April 15, but nearly 240 years after the founders threw a Boston Tea Party to protest unfair taxes, citizens are using less dramatic – but no less creative – ways to test the tax code. Modern-day challenges often end in U.S. Tax Court, where citizens can go to take on the Internal Revenue Service.
The basic questions that get brought up in Tax Court seem straightforward enough: What is income and what are its related expenses? The specifics can get, well, flat-out weird.
The IRS code may be full of loopholes and deductions as it is, but the IRS has also approved more than a few imaginative – even wacky – tax breaks.
If you have a huge deduction that you’d like to take but are unsure if it will pass muster with the IRS, talk to your tax preparer to see if a private letter ruling (PLR) makes sense, advises Gil Charney, principal tax researcher at the Tax Institute at H&R Block in Kansas City, Missouri. The PLR is written guidance from the IRS that provides an advanced decision on how it would treat the case. It does cost money, so make sure the deduction is worth it.
Maximizing the look of your muscles
The Tax Court ruled that a professional body builder who uses special oils to prepare for competition could deduct their cost.
What is not deductible are the wheat-grass shots and buffalo meat he eats to tone his form. Go figure.
Tax breaks for drug dealers
If you make your money dealing illegal drugs, getting your taxes right might not be high on your list of priorities, but just because the money is made illegally, doesn’t mean the IRS won’t accept taxes on it.
The Tax Court has clarified some potentially helpful details on the situation. (Remember, sometimes tax evasion is easier to prove than more insidious crimes. Think Al Capone.)
Baggies and soil for marijuana plants are not deductible. Neither is the apartment you work from or the cost of your security team. However, you can deduct the cost of your product.
Depreciating breast implants
A stripper known as Chesty Love was allowed to write off her breast implants because they’re considered a stage prop. As it applies to business expenses, those assets can now be depreciated each year, even if her clients’ appreciation for them never diminishes.
See the rest of the story at Business Insider
Please follow Your Money on Twitter and Facebook.