Debt Limit Talks and Chesty, Oily, Business Deductions

So, as the debt limit negotiations turn inside the beltway known as Washington D.C., taxes seem to be an even hotter topic than usual. Will President Obama and the Democrats get their way and force even more onerous taxes on the wealthy? (They already pay ninety percent of the nation’s tax bill.) Or, will Speaker Boehner be forced by the tea party presence inside the Republican party to hold the line on personal income tax rates? Only time and a fake default will tell. Either way, it keeps the job of tax planning alive with possibilities.

One of the more attention grabbing plans touted over the course of the last week came from Senator Tom Coburn, Oklahoma Republican. The plan he proposes would cut $9 trillion from the Federal Budget over the next  ten years. Now, that is some savings, but I think I might have a problem with how some of those savings may be achieved.

Sen. Coburn is described as a fiscal conservative which is how I usually describe myself, and that is really about all I have in common with any Republican. I also must admit I know very little of the details of Sen. Coburn’s plan. The source of information for this post comes from The Washington Times article which you can find here. The article talks about some of the more frivolous business tax deductions that are either part of the tax code or have been allowed by various tax courts around the country. This article chose to point out whaling ship captain deductions, office holiday parties, feeding stray cats, body oil and breast implants as being frivolous.

Whaling has been banned in the U.S. for sometime, but certain Eskimo tribes are allowed to harvest whales from the arctic ocean as part of their native way of life. Apparently, since 2005 such whaling ship captains are allowed to take up to $10,000 of expenses for fuel and weapons as a charitable deduction. This is really not going to be a big revenue raiser for the Treasury if a handful of Eskimo tribes lose this deduction. They are not charging the other villagers for the meat in the first place. Seems like a charitable donation to me. Pick on someone else.

The article points out that businesses can deduct the cost of “recreational, social or similar activities” for low paid employees and therefore the cost of office holiday parties. I don’t know if this was specifically pointed out by the Senator or not, but any reporter should know that when the newspaper is footing the bill for their holiday party, that the newspaper is deducting it as a legitimate business expense. Even the food and entertainment that can be apportioned to the not so low wage employee is deductible.

The feeding of stray cats by the junkyard owners as a business expense just to keep rodents away doesn’t seem legit to me. If you are feeding the cats food, why do they have to catch rats? I think the tax court messed up on that one. But surely body oil for professional body builders and breast implants for exotic dancers are certainly legit deductions.

However, I believe the tax court did get it wrong when they assigned the breast implants a five year depreciation life. Breast implants are clearly a non-categorized asset and should be depreciated over a seven year life span along with all the other non-categorized assets. Kind of makes you wonder how Chesty Love, the exotic dancer who won the case on appeal, choreographed that one with the appellate judges.

No matter what happens with the debt limit negotiations, be it the raising of taxes or elimination of deductions that will be employed in paying off Washington’s unconstitutional spending habits, I will be looking for ways to make sure my clients will not be paying a dime more than necessary. Let me know what you think.

About this Author 

John Beidle is an enrolled agent who specializes in helping entrepreneurs, small business owners and real estate investors pay the least amount of tax as legally possible.

About The Author

John Beidle

John Beidle is an enrolled agent who specializes in helping entrepreneurs, small business owners and real estate investors pay the least amount of tax as legally possible.

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