A woman used her own money to care for feral cats. She fostered them in her home for a charity that specialized in neutering wild cats. She spent more than $12,000 paying vet bills, food and other items. A Tax Court allowed her to claim the charitable deduction, but limited her write-off because she failed to meet the substantiation rules. This means she failed to get a contemporaneous acknowledgement from the charity each time she spent over $250 on the charity’s behest. If she had received acknowledgement from the charity she could have deducted all her costs.
Body Builders and The Oil They Use
A professional body builder used body oil on his muscles to make them glisten during his competitions. Tax Court ruled he could deduct the cost of the oil because it was a business expense. They would not allow him to deduct foods and vitamins that he used to enhance strength and muscle development.
Paying for Wrongdoing?
An insurance company sued two doctors for insurance fraud. The doctors admitted liability and agreed to reimburse the insurer for the losses. The IRS ruled that the repayments are deductible as long as the doctors originally included the money in their incomes the prior year. They didn’t get off too easy though. The IRS said the repaid funds are a miscellaneous itemized deduction that’s allowed only to the extent it exceeds 2% of the doctors adjusted gross incomes.
Wreck a Car While You Are Drunk?
A man who drank too much at a party arranged a ride home. A few hours later, that same man, after giving the drinking a rest thought he would be okay to drive home. Unfortunately, his vehicle slid off the road and rolled over. He was arrested for drunk driving; his blood alcohol was just above the legal limit. His insurer refused to pay for the damage to the car because of the arrest. But the Tax Court let him deduct the cost of the damage as a casualty loss. Because he said that he had tried to act reasonably. Had he driven straight home with a higher blood alcohol content and had the accident, they would have rejected his write-off.
Barking Dogs
A self-employed consultant working in her condo sued her neighbors and the Condo HOA, alleging that her work was disrupted by noise from faulty construction and barking dogs. She attempted to deduct $26,000 in legal fees as business expenses. The IRS said the legal fees were a personal cost. But the Tax Court approved half the write-off because she used 50% of the condo for business. The IRS also failed to prove that the noise didn’t adversely affect her business use.