The makers of TurboTax contend they aren't pulling your leg - the tax preparation software company has compiled what they say are real examples of foolish deductions people have tried to claim when filing their taxes.
In honor of April Fools' Day, Thursday, TurboTax provided their list of the 12 Most Foolish Tax Write-Offs Ever Attempted, and the ludicrous reasoning behind them.
Including arson and witchcraft, CBS station KPIX by the public relations firm for TurboTax also included free beer, bribery, sex toys and ostrich depreciation.
Here's the list in more detail:
In 2008, New York City resident William Magdalin cleverly tried to squeeze through a legal loophole that allows the deduction of sperm donation costs. Unfortunately for Megdalin, the U.S. First Circuit court of appeals upheld an earlier court decision to strike down his scheme. The court decision reads, in part: "The various expenses incurred by petitioner [Magdalin] were not for the treatment of any underlying medical condition suffered by the taxpayer; as noted, he stipulated that he was not infertile and that his previous children had been produced by natural processes..."
In an article on bizarre tax breaks from around the world, London's DailyMail newspaper reported on Netherlands resident Margarita Rongen. She was dubbed the "tax-certified witch" who successfully wrote off the costs of such training as "healing with herbs and stones, making potions, divination and fortune telling with crystal balls and hieroglyphs" as qualified education expenses in 2005.
Giveaways are common sales tactics, and it may seem ordinary that a business owner would try deducting the costs of running them. But perhaps no giveaway was as destined for IRS scrutiny as free beer, which a gas station owner reportedly offered up to his customers instead of trading stamps. Amazingly, the alcoholic deduction withstood legal challenges as a legitimate and defensible business expense.
A Pittsburgh, Pennsylvania furniture store owner hired an arsonist to burn his building down after trying and failing to sell the business. He might have gotten away with it if not for what he included on that year's income tax return. The disgruntled shopkeeper received (and reported on his tax return) a $500,000 payment from his insurance company, but he also "wrote off the $10,000 "consulting fee" he paid the arsonist." Once the IRS caught on, the shopkeeper got slapped with over $6,000 in fines and both he and the arsonist got sent off to prison for insurance fraud.
Bribery was once a legally sanctioned, tax-deductible activity in Germany. While not as many people as you might expect actually used the deduction (because both the source and recipient of the bribe had to identify themselves) the controversial write-off received a steady barrage of criticism. Eventually, German politicians opted to repeal it.
A man built a full-fledged, underground nuclear fallout shelter in his backyard during the U.S.-Soviet Union arms race. His income tax return for that year tried to deduct the costs of building the shelter as a "preventative medicine expense," but the IRS immediately put the kibosh on the attempted write-off.
Australia took the decidedly unusual step in 2006 of allowing prostitutes, strippers and other members of "the sex industry" to deduct the cost of buying sex toys.
The Houston Chronicle reported the story of how playing the clarinet demonstrably lessens the pain of overbite, an agonizing tooth defect. And so, parents have been permitted to write off the costs of clarinet lessons as a legitimate medical expense. As the Chronicle explained, legally deductible medical expenses "involve diagnosis, cure, treatment or prevention of a disease or health condition for you, a spouse or a dependent."
Few things epitomize the idea of a ridiculous income tax write-off more than breast implants. But Cynthia Hess (better known by her stage alias of "Chesty Love") defended her deduction all the way to the United States Tax Court and prevailed. The court conceded that since Hess earned her living by stripping, breast implants did satisfy the Internal Revenue Code requirement that business expenses be "ordinary and necessary" for one's line of work.
Navajo healing ceremonies
Navajo healing ceremonies, which attempt to eradicate pain and curses using various chants and songs, can be lawfully deducted from income taxes. The cost of holding or participating in such ceremonies are tax-deductible provided that "it was prescribed for a medical purpose or to alleviate a condition," according to tax attorney Donna LeValley. Navajo healing ceremonies aren't the only "alternative" treatment options that potentially qualify as tax write-offs, as electric shock, whirlpool baths and hydrotherapy have all been lawfully deducted in the past.
A junkyard-owning husband and wife routinely sprinkled cat food around the premises to tempt stray cats into hanging around. Their reason? The cats "took care of snakes and rats on the property, making the place safer for customers." Naturally, this attempted deduction did not pass unchallenged. But when the couple made their case that the cat food had been instrumental to keeping dangerous rodents away from their life-sustaining business, the IRS allowed the deduction to stand.
Businesses are used to depreciating standard equipment like computers, truck fleets and buildings. So, an ostrich farmer from Louisiana submitted a tax return that wrote off the depreciated value of his ostrich. Odd as it may sound, farmers are indeed allowed by the Internal Revenue Code to depreciate the value of their livestock provided they are being used for breeding (rather than producing food products for sale).