When the IRS disallows a business deduction, your first appeal is often the US Tax Court. The Tax Court judges are selected specifically for their knowledge of tax laws and they frequently handle very complex issues when it comes to how those laws should be interpreted.
Number 5 - Pet Food. You may have heard the story about the guy who for years listed his dog as a dependent until the IRS put a stop to that, but the Tax Court did allow a man to deduct the cost of cat food he put out at his place of business to feed wild cats. The cats kept away rodents and snakes that were running about his junk yard.
Number 4 - Ostriches. Under tax law, livestock kept as breeding stock can be depreciated and the Tax Court has decided that under the right circumstances ostriches are depreciable assets.
Number 3 - Baby Oil. A professional body builder was allowed to deduct the cost of body oil used to enhance his appearance in competitions.
Number 2 - Breast Implants. An exotic dancer had her breasts enlarged to 56FF and took a deduction for $2,000 for the depreciation of the cost of her new “assets,” claiming the surgery was to substantially increase her income, which in fact it did. The IRS disallowed the deduction saying cosmetic surgery is a personal expense, but the Tax Court disagreed ruling that the size was not the kind a normal woman would get for appearance reasons and allowed her to claim the business expense.
Number 1 - Beer. A gas station owner was denied a deduction for beer that he purchased and gave away to customers. The Tax Court overruled the IRS saying the kegger was for legitimate business purposes; to promote his gas station.
Make sure to track all of your expenses, you never know…
