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