Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

NOT DEDUCTIBLE? INFLATE THE AMOUNT - THEN DEDUCT IT TWICE!

May 20, 2004

If you are going to take a deduction you aren't entitled to, you might as well go all out. Lorianne Blake did. She sold Herbalife products on the side. She also used them personally.

According to the Tax Court, she deducted the products she used personally as follows:

1. She deducted them as cost of goods sold.
2. She also deducted them as advertising expenses.
3. Finally, she deducted them at retail value, rather than her cost.

The IRS determined that she took excess deductions over two years of $17,748, and the Tax Court upheld the IRS.

The courts are reluctant to let people deduct stuff they ingest. Still, it seems unfair, if you are selling things that give you radiant good looks, to disallow a deduction when you are a walking advertisement for the product. Is the taxpayer a walking advertisment for Herbalife? You make the call.

      Bookmark: del.icio.us • Digg • reddit