You may be surprised at some of the “odd” expenses the IRS, the Tax Court and other foreign tax bodies have allowed. That beer for example. Now that tax season is finally over, we thought it would nice to sit back and admire (or at least chuckle over) some of the more creative tax saving strategies that have been proposed—and in many cases worked. Consider these:
- Beer. Generally, the cost of beer is not a deductible expense. However, one company claimed that it was using beer to promote itself and attract customers – akin to advertising signs and the like. Surprisingly, the Tax Court allowed the deduction because it was for advertising. Yes, really.
- Bodybuilder oil. Bodybuilders generally lube themselves up with oil before a competition to make their muscles gleam onstage. One entreprenuering muscleman attempted to deduct the cost of the oil he used. Believe it or not, the IRS allowed it on the ground that winning bodybuilding contests was how he made a living.
- Travel expenses to hear live jazz. Travel expenses for purely personal reasons aren’t generally deductible. However, a bass player and music teacher tried to deduct travel expenses to hear live jazz as a work related expense—research, we’re guessing. On initial review the IRS called shenanigans, reasoning that since he enjoyed the music it was for personal pleasure rather than his job. Leading us to wonder where this leaves research librarians who enjoy their jobs. . . . but fear not, on appeal the Tax Court allowed the deduction, reasoning that it was allowable because the taxpayer later taught his students things he learned from the performances. Leading us to wonder again– would the deduction still be allowable if he didn’t like the performance and chose not to take anything from it for his teaching?
- Avoiding taxes on 401K with murdered principal. This grisly situation presented a very creative tax avoidance argument that was predictably disallowed. A wife killed her husband, was convicted, and went to jail. She was the named beneficiary of her late husband’s 401K, but did not collect the proceeds because she was in prison for his murder. Instead the proceeds passed to the contingent beneficiary, the couple’s son—who argued he should not be responsible for the taxes on the 401K funds—his mother in jail should pay them. His reasoning? Had his mother not committed the murder she would have been the 401K beneficiary so she should pay the taxes. Surprisingly, this reasoning was accepted in the early stages of the case, but ultimately an Appeals Court ruled that the person who received the money was responsible for the taxes associated with it.
- Bribes. Although you wouldn’t think that money spent on bribes would even be reduced to writing, the practice is actually allowed in Germany. In fact, it’s part of the country’s tax code. All you have to do is disclose the name of the official you bribed and how much you spent and bam! Deduction. What happens with German anti-corruption officials concerning the bribe after that remains unclear . . . . .
Have a story about tax strategies, strange but true? Share it with us by commenting below.