10 Hard to Believe Crazy Federal Tax Rules
You would be hard-pressed to find any small business owner who likes to deal with the IRS and tax regulations. The IRS and their thousands of pages of rules are a major pain and definitely not amusing. They are not in the business of being amusing, but they just seem to fall into it with some of the crazy tax rules you can find when burrowing through their regulations.
- The oily body builder deduction:
The IRS has ruled that the cost of the oils used by body builders to prepare for competition is a deductible expense. Interesting though that the special foods and juices to build those muscles are usually not deductible. It seems that it is not a business expense to build the muscles, but it is to display them.
- Drug dealing is taxable:
The IRS does not rule out your liability to pay income taxes just because you make a profit in an illicit enterprise like dealing drugs. You should still report the income and pay your taxes. While you cannot deduct expenses to create or transport drugs, you could deduct the cost of buying them for resale.
- When breast implants are depreciable:
Chesty Love was a stripper who wanted to write off the cost of her impressive breast implants. The IRS ruled them to be a depreciable expense as they could be considered a stage prop. There is no mention of whether Section 179 was allowable at the time, so it is assumed that she depreciated them over timei.
- Performing artist deductions:
What is weirdest about this deductibility discussion is the great detail the IRS goes into to determine deductibility of expenses for performing or street artists. Here is one quote: “They have to have at least two employers and receive at least $200 in income from each; job-related expenses are more than 10 percent of income from performing artist jobs; and their adjusted gross income cannot exceed $16,000.”
- Excise tax on arrows:
There has long been an excise tax levied on arrows to fund wildlife restoration activities. What is interesting is one wrinkle in the rules that levies a $0.46 per arrow excise tax on arrows over 18 inches in length and suited for a specific type of bow with a specific amount of draw. There are some IRS employees with interesting jobs thinking up these arcane rules.
- Clarinet lessons for overbite are deductible:
A young girl with overbite was prescribed clarinet lessons by her doctor to correct the condition. The IRS deemed the lessons to be a valid medical expense. It makes you wonder if you could get a valid medical deduction for guitar lessons for arthritic hands.
- Tax free rental Income
You can rent out space like a garage apartment, room, or mother-in-law space for up to 15 days in the year and the income is totally tax free. If you rent it out more than that, you must pay taxes on the rental income, but you can then take some rental expense deductions as well.
- Which is deductible, Armani or Clown suits?
Both a highly compensated lawyer and a performance clown are engaged in income-producing activities. The difference is that the lawyer cannot deduct the cost of those high-dollar suits, but the clown can deduct their costume costs. The IRS uses the test of whether the clothing can be regularly worn elsewhere.
- Write off deadbeat relative unpaid loans.
If you loan a relative money and they do not pay it back, the IRS says that you can write it off as a loss on your return. You must have the loan terms in writing, and you can only write off up to $3,000 in a year and $10,000 total.
- Write off burning down your house.
Do you have a house in such bad condition that you cannot sell it? The IRS says that you can donate it to the fire department to burn it down for training and write off the loss. You must donate the land as well though.
If is not likely that any readers of this list will find a tax tip they can use, but you never know.