Mon, Mar 14, 2011 - Page 7 News List

From prostitutes to bikinis: US prepares deductions on taxes

AFP, WASHINGTON

Prostitutes, cat food, trips to Africa: There are few limits to the expenses Americans believe should be tax deductible, but given the complexity of the tax code, they may be forgiven.

To file taxes in the US is to enter a Byzantine labyrinth replete with pitfalls and potholes.

The system is so complex that ahead of the tax deadline this April 18, tens of millions of Americans — including the head of the Internal Revenue Service — will hire professional help to complete their filings.

“It’s a horror show” said Ann Murphy, who was an IRS attorney for nearly 15 years and now teaches at Gonzaga University.

While even choosing how to file can be tricky — singly, jointly as a couple, separately in a couple, as a head of household or qualified widower — choosing which expenses are deductible might be the most fiendish task.

“You can deduct for business expenses, but not if it gets too personal, and that is just a really tough line,” Murphy said.

Frequently that line is crossed.

In the past the US tax court has ruled that a man who spent US$65,934 on New York prostitutes in one year could not mark it down as a medical expense.

Earlier this year, a court took a dim view of a female Ohio news anchor who claimed business expenses of about US$20,000 a year for makeup, self-defense classes, a cotton bikini and thong and subscriptions to Cosmopolitan and Newsweek.

A Texas woman was equally unsuccessful in claiming a US$1,036 rebate because the value of her emu was depreciating and a Pennsylvania furniture store owner could not claim a half million payment to an arsonist as a “service” cost.

By the same measure, sperm donations, mink coats and gambling losses are not always tax deductible.

However, over the years the line between illegitimate and legitimate claims has been blurred, pulled and stretched.

In one infamous case from the 1980s, exotic dancer “Chesty Love” successfully claimed for the costs of enlarging her bust size to 56FF. A court ruled that her “freakishly large breasts” were indeed part of a costume that was “useful only in her business.”

Similarly, the owners of a junkyard on Hardscrabble Road in Columbia, South Carolina, successfully claimed US$300 in expenses for cat food, to lure in cats and keep snakes and rats at bay.

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