Wacky Tax Deductions

NEW YORK (MainStreet) — Would you try to deduct your dog as a burglar alarm for your home office? How about cosmetic surgery for breast implants?

Those are two of the wackier deductions taxpayers have proposed to take on their federal returns. But what's even wackier is that, while the first deduction was denied by the IRS, the second was not. The IRS has ruled repeatedly that puppy chow, vet visits and other costs associated with keeping a dog can't be written off as business expenses on the basis that the dog provides security.

It tried to do the same with an exotic dancer who wanted to deduct the cost of her breast implants, but the federal tax court said the ersatz chest was a legitimate cost related to her work.

There are just a few of the oddball tax deductions that CPAs see clients trying to wangle, including one who wanted to write off a home media room as a videoconferencing center. The taxpayer in that case decided on the advice of his tax preparer not to try to claim the deduction. Most off-beat tax deductions meet similar fates when they run up against cautious accountants.

But some persistent taxpayers give up only after the IRS formally tells them the deductions won't fly. And a small number are willing to pursue the matter all the way to tax court. There, still more zany tax deductions fall by the wayside. But a few manage to receive the stamp of approval of the tax court judges.

For instance, one guy wrote off payments to his girlfriend, claiming she was helping him manage his rental property and coordinate his personal household. The tax court said he could deduct a portion of the payments as an expense against rental income. The part of the payments that was judged to be for housekeeping, however, was ruled a personal expense and non-deductible.

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