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Tax Toolbox


Doing your taxes can be less frustrating, less time-consuming and less costly if you're prepared.

9 weirdest tax write-offs
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Playing with fire
Herb Wakeford, a CPA in Raleigh, N.C., recalls a Pittsburgh furniture-store owner who, after years of trying unsuccessfully to sell his business, hired an arsonist to torch the place. The insurance company paid off to the tune of $500,000, which the owner dutifully reported on his income tax return. However, along with taking the proper deductions for the building, its contents and the usual business expenses, he also deducted a $10,000 "consulting fee" he had paid the arsonist. An IRS audit two years later landed them both in jail. The IRS disallowed the "consulting fee" and slapped on $6,500 in additional taxes, penalties and interest.

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What, not the Barcalounger?
Then there was the client who insisted on deducting the cost of his television and cable service, against his accountant's advice. "His reasoning was that he was a Spanish teacher at school, and the only reason he bought the TV and had the cable was for the Spanish channels so he could be able to teach his students better," Howard says. "I told him, 'Well now, not too many people out there can deduct the cost of their TV and cable, but if you can get away with it, knock yourself out.'"

Fun with livestock, part I
Back when the Society of Louisiana CPAs manned a tax hot line, few inquiries stumped them. But Al Suffrin, SLCPA's communications and public relations director, recalls one that did: "We took a call from an ostrich farmer in St. Tammany Parish who called in to find out how to go about depreciating an ostrich," he says. Strange as it sounds, you can depreciate an ostrich or any other livestock, as long as it's used for breeding.

Fun with livestock, part II
Which brings us to the tale of the crusty old Texas rancher who insisted upon accompanying his CPA, Raymond Lott, of Lott, Vernon & Company in Killeen, to the rancher's first tax audit. When the rancher's tax depreciation schedule listed 15 or 20 animals as breeding stock, the no-nonsense young IRS agent challenged the old cowboy. "I presume you breed these animals?" she asked pointedly. Without hesitation, the rancher replied, "Nope," sending his CPA into mild tachycardia. After a sufficient pause, the rancher finished the popular Texas joke, "I've got a bull for that."

Go fish
There was a time when deductions were as plentiful as dinner mints. "Many years ago when I was a young clerk, a local CPA kept a very large glass bowl filled with receipts in his office," says Nancy Reynolds of Reynolds & Associates in Naples, Fla. "If a client came in and was a little shy of deductions, they merely dipped into the bowl and helped themselves to some of those glorious deductions."

Sic him, Fido
Sometimes deductions seem so logical they just have to be legal.

"I had a guy come in one time wanting to know if he could deduct the cost of his dog food. His reasoning was that his dog was security for his house, therefore the dog food became a security expense," Howard says.

"I kind of liked that one. The IRS loves that stuff."

He works in mysterious ways
And when all other loopholes seem closed, sometimes only a higher power can help.

One fine February, a rookie tax accountant completed a slam-dunk return for one of the firm's old and trusted clients and turned it in to his boss, says Mary Anne Petesch, a CPA with Hagen Kurth Perman and Co. of Seattle. There followed several loud whoops of laughter from the partner's office.

It seems the client had accidentally lost his dentures when they fell in the toilet and had claimed them on his taxes as an act-of-God casualty loss.

Jay MacDonald is a contributing editor based in Mississippi.

-- Updated: March 22, 2006
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