Best of TaxLetter: A Few Final Stories

A company in New York offers "Tacks Shelters for Christmas". Each "Tacks Shelter" comes with income tacks, social security tacks, withholding tacks, real estate tacks plus a booklet that describes structuring, managing, and leveraging the Tacks Shelter. If you haven't guessed, it's a fancy box of thumb tacks, $6.95. (No. 27)

Horse Power. A 10% energy tax credit is allowed for recycling equipment. One farmer is advised by IRS that his manure spreader does not qualify as recycling equipment because it doesn't convert the waste into anything. But the letter ruling implies that a dung pattie machine might qualify. (No. 16)

Psychoanalysis. Psychoanalysis is normally a medical deduction subject to the 3% limitation. To avoid this, one psychologist deducted it as an education expense. The deeper self-understanding gained through the analysis directly improved her skills as a psychotherapist, she argued. Actually, they were designed to alleviate her own anxiety and depression. But the court allowed the $6,000 in analyst fees as an education expense, even though her earnings for the year were only $1,800. (No. 16)

A Nice Try. Taxpayers are always devising ways to pay the least tax on dividend income from their closely held corporations. Warren Cordner had his corporation buy 275 U.S. Double Eagle gold coins for $75,000, which it then distributed to him. Calculating a face value of $20 each, he declared dividend income of $5,500. But the court ruled that the dividend was the $75,000 fair market value, not the $5,500 face value, of the rare coins. (No. 16)

IRS Goes Fishing. IRS recently rented a mailing list of 200,000 doctors and dentists. It then checked these names and addresses with its files. If the name could not be matched with a filed return, IRS sent a letter to the person. The campaign turned up "quite a few" non-filers. However, the mailing list usually showed the person's business address, while the tax return usually showed the person's residence address. Thus, many who did file returns received a letter. (November 1979)

Funerals. Mr. Carr claimed a medical deduction for the cost of his mother's funeral. He also claimed a business expense deduction for the cost of his brother-in-law's funeral. Funerals are not deductible. Carr also deducted expenses for driving his three cars 70,000 miles per year, mostly unreceipted cash expenditures. While not doubting that he drove 70,000 miles per year, the court only allowed him to deduct $1,300 per year -- the amount of receipts he actually produced -- about 1.9 cents per mile. (November 1979)

Contraband Reading. Omer Ware testified that he had read such books as The Big Bluff, The Constitution Against the Tax Collector, The Federal Monster, The Federal Reserve Hoax, The Age of Deception, Tax Slavery or Manhood, and Tax Revolt. This certainly established that he acted deliberately, the appeals court noted, and upheld his one year sentence for failure to file 1973, 1974, and 1975 tax returns. (November 1979)

Terry-Thomas Lament. In an article entitled "Is American Business Being Managed to Death?", The Economist complains, "For example, why does America still have so many accountants? Accounting is now one of the most automated parts of a modern company. In theory, accountants should have been displaced by technology as relentlessly as production workers. (No. 56)