The 7 Most Insane Ways People Legally Avoided Paying Taxes
Nobody wants to cross the IRS -- if they can put infamous gangsters and Wesley Snipes behind bars, they won't hesitate to steamroll your sorry ass. Most of us fill out our forms and pray that a math error won't result in a black van showing up at our house and peppering it with machine gun fire.
But the truth is that the IRS isn't nearly as hardass as people think. There is a huge range of things you're allowed to write off from your taxes if you can make some kind of argument. And some of them are truly insane. Like ...
A Drunk Driver Deducts His Crashed Car
In 2005, Justin Rohrs and his truck slid off an embankment. If that didn't already ruin his day, it got worse after the police came and found that Rohrs was legally drunk and slapped him with a DUI. When Rohrs attempted the rather ballsy act of filing an insurance claim for $33,629, his insurance company predictably denied it. Because screw that guy. So far, society seems to be handling the situation perfectly.
Undaunted, Rohrs then attempted to deduct the loss of the vehicle from his taxes. The presumably stunned IRS turned him down ... at first. But Rohrs brought the case to the U.S. Tax Court to try to force the issue. He deserved a casualty loss deduction for his damaged truck, drunkenness be damned! And ... the judge agreed. He got to take the deduction.
"Your truck was clearly needed for business purposes."
How in the shit is this possible?
Well, according to tax law, deducting the costs of car accidents is a valid casualty loss deduction, so long as the accident was not caused by your own willful negligence or actions. And somehow, according to the courts, Rohrs did not act with negligence.
"I swear, at no point did I consume more than two light beers and one shot of vodka per hour."
You see, on the night of the crash, Rohrs was planning to go to a party at his friend's house. Knowing he'd be drinking, he made plans to get there and get back without driving himself. The problem is, after the party, Rohrs made it home, but then decided to drunk drive over to his parents' house. The judge deemed that Rohrs acted responsibly, applauding the fact that he had enough foresight to arrange a ride home after the party. Sure, he drove drunk, but he could have drunk drove more.
It's like emptying your gun into a group of puppies and missing. Technically you've done nothing wrong.
The judge ruled that driving after drinking doesn't amount to willful negligence in itself, and that the level of intoxication and the quality of driving needed to be taken into account. Both of these were of a satisfactory level to the judge, so he ruled that Rohrs was allowed to deduct his accident as a casualty loss.
Now, before you go out and try this yourself, there was (as you can imagine) some outrage over the ruling. Finding a tax court that will do the same for you now is pretty damned unlikely, presumably unless you come across a judge who also happens to be drunk that day.
A Cat Lady Deducts Her 70 Cats as a Charity
Reclusive cat enthusiast Jan Van Dusen enjoys the felines. In fact, she would go out of her way to capture random feral cats on the street and care for them in her home, to the point that she was caring for 70-plus cats at one time. After treating them for any injuries they had sustained, sometimes she would release them back into the wild. Other times (70 other times, to be precise), she wouldn't.
As one would imagine, caring for a large pride of stray animals racked up some serious costs. For her 2004 tax return, Van Dusen tried to write off $12,068 for all her cat "rescue" items like cat food, vet bills, paper towels and other supplies.
Pictured: Other supplies.
The IRS, not known for its compassion even toward humans, told the cat lady that these were personal expenses and couldn't be deducted. In response, Van Dusen sued the IRS. As a person who cared more about the feral cats than ... anything, Van Dusen was nearly bankrupt and couldn't afford a lawyer, so she went up against the IRS' deadly lawyer army alone.
Although she did bring 70 "surprise" witnesses.
Throughout the case, Van Dusen tried to establish her credibility by saying that her cat rescue obsession (although she put it less crazy than that) was outside work for her volunteer duties for Fix Our Ferals, an IRS-qualified nonprofit organization which, by the way, she had no formal affiliation with. However, she produced checks and receipts for many of her purchases, and she explained that her house was so dedicated to cat care that she never had people over.
We're guessing there may have been other factors for that.
Despite the IRS' constant comparisons of Van Dusen to a crazy cat lady, she actually managed to beat the IRS and got deductions for most of her claims. Her victory served as a precedent that can help numerous other animal shelter organizations, and help justify any other out of control hobbies people have.
Related: 5 Ways to Improve Cats
A Corrupt Businessman Deducts His Illegal Bribes
Unethical and business-savvy capitalist William D. Zack ran several companies in the '70s and '80s that engaged in some shady practices. In 1984, Zack's company began doing business with Ford, and in order to get some fake invoices that would let him skim money from his own company undetected, he had to bribe some people there. And we're not talking a few hundred dollars -- the bribes totaled more than $180,000, paid with the company money he was skimming.
Zack was eventually caught and charged with defrauding the American government, so he was soon facing an IRS that was determined to get back the money he screwed them out of with the fake invoice scheme. If he made money, he owed taxes on it, even if the money was made illegally.
"Woah now, we just want in on this. Then you can shoot whoever you want."
Zack, however, filed a petition to the Tax Court, arguing that he should be permitted to write off the bribes he paid, and thus reduce his tax bill. You know, the bribes he paid to facilitate his fraud. He claimed the under-the-table payments as legal "operating losses."
And ... the court agreed. It wound up slashing his taxable income by a quarter.
The IRS is concerned with money, not breathtaking immorality. Would you really rather it were any other way?
The idea of deducting bribes, an illegal activity, might sound impossible and stupid. However, it is a fairly common practice among industrial nations, including the U.S. In fact, the United States is one of the more conservative nations when it comes to bribery deductions. In Germany, tax deductions for bribes are perfectly legal ... with the catch that when you file your return, you have to report who you paid the bribe to. Not many people take them up on it.
"Yes, myself and the president of Burundi will be filing jointly."
Robert Mayo Writes Off Gambling Losses
If there are two things we've learned from watching gambling movies like Casino, it's never play in a casino when Pesci or DeNiro runs it, and that the house always wins. Gambling never ends well for the vast majority of people who do it, and when they keep giving you free drinks, you should take that as a sign that they just want to take advantage of you. As a result, you would think that no one at any level of government would feel sorry for you for blowing your paycheck down at the track.
Although they use similar methods as casinos when you owe them money.
But in 2001, gambler Robert Mayo bet $131,760 on horse racing and collected $120,463 on his wagers. So he wound up in the hole. Naturally, on his tax returns for the year he listed $10,968 in expenses for travel to the racetracks, research and "handicapping information."
It seems like a ballsy move to challenge the IRS after you lost in Vegas, because the odds of beating the IRS are bigger than even Vegas would touch. However, a decade later, the court ruled with Mayo, saying that these were not gambling losses, but business expenses. This was a very important case, as it deemed on a federal level that being a professional gambler is an actual job.
That's the sound of a thousand people quitting their real jobs and quickly becoming professional homeless people.
But don't take this as a precedent that means your gambling is a sensible, risk-free venture. The "professional gamblers only" rule is determined on a case by case basis, to weed out those who feel the weekend bachelor party that ended with them putting up the house on a Knicks game works as a tax deduction. No, they need to know that you somehow are so good at gambling that you make most of your income from it. That's right; in order to get the deduction, you need to 1) gamble a lot and 2) win. You can't walk away now, dude! We can totally feel your luck is about to turn around!
The government is like that judgmental friend who suddenly approves when you win.
An Exotic Dancer Deducts Her Breast Implants
People who say it's what's on the inside that counts probably don't work as strippers. Just look at the case of Cynthia Hess, better known by her stage name, "Tonda Marie." While she made money as an exotic dancer, she made less than other dancers due to her "hereditary deficiency," which was her way of saying she had average-sized boobs. In the competitive environment of taking your shirt off in front of horny guys, average doesn't cut it. So Tonda decided to get breast implants to make a better living. What does she go for? A good handful of C cups? Double D's? Try 56 FF.
How does she use seat belts?
Yes, she decided to bypass the pleasantly large boobs stage to the "Sweet holy crap, what monster cut you open and implanted you with basketballs!?" stage. Or maybe bowling balls are a better comparison -- each new boob weighed 10 pounds. After the life-changing event, she adopted a new identity and changed her stage name to the subtle "Chesty Love."
Naturally, she decided to deduct the implants as a business expense. The IRS, having said no to much more normal deductions, obviously said no to this one. They backed up their response by saying that business deductions only work for outlays that are "ordinary and necessary" in the business field and that the IRS code does not allow deductions that improve your appearance. Chesty pressed the point, saying that when she went back to work, her fees and tips doubled. Obviously, her boobs were improving her career.
None of the tips were voluntary -- the boobs just created their own money gravitational field.
So, Chesty sued the IRS for the deduction and did a hell of a job proving that her boobs were necessary in her profession. She argued that the implants should be in the category of a business uniform -- they were useless outside of the context of her job, and she intended to remove them immediately after she retired from exotic dancing. She also explained that the surgery did not improve her appearance, as she was constantly ridiculed on the streets and was ostracized by her family.
"When we hugged I just didn't feel very close to them."
Apparently convinced by Chesty's testimony, or at least mesmerized by the boobs in front of them, the tax court agreed to deduct her breast implants. They stated, on a federal court record, that her boobs were so horrendously large that they could've only been used for business purposes, so that made them deductible. We suppose there is a moral here, though we're not exactly sure what it is.
For some reason we were too busy typing "travel pillow" into Amazon.
An NBA Player Deducts His Fines
Depending on what type of person you are, you know Lamar Odom either as a forward for the Dallas Mavericks or as Mr. Khloe Kardashian. Fewer people know Lamar Odom as something he recently became: an amateur tax lawyer.
In 2010, the IRS sent him an $87,000-plus interest bill concerning his 2007 taxes, as well as a letter saying he was not allowed to deduct $172,000 in "fitness fees" and, even stupider, $12,000 in NBA fines from his 2007 tax return. In 2007, he was a modest man living on a modest salary of $9.3 million, so Odom challenged the IRS' ruling and sued them. Odom was a college dropout and made his living using every muscle other than his brain, but this didn't stop him from filing the suit and representing himself.
"$5,000? No thanks, I'll fix my own torn knee ligament."
When asked about his $172,000 deduction for fitness fees, he stated that, as a pro athlete, he is obligated to stay fit and healthy, and therefore all his regimens could be deducted as business expenses. That is a logical response, but considering he has a workout that could be easily performed at any gym or any prison, the large fees account for either a holodecklike virtual reality facility he has in his backyard or a robotic personal trainer. Or maybe he just hates taxes as much as the next guy who doesn't have a multimillion dollar salary.
Regarding the $12,000 deduction for his NBA fines, otherwise known as the cost of doing things he shouldn't have been doing, he creatively stated that they "are commonly assessed on professional athletes and are work related. Therefore the fines incurred are ordinary and necessary employee business expense."
"Basketball is my hobby. Fouls and verbal abuse are full time jobs."
Apparently Odom made sense, as the tax attorney he later hired stated that the IRS completely threw in the towel for his fines and fitness claims, and they settled for about 10 cents on the dollar. In the settlement, the IRS agreed to take only $7,827 plus $1,000 in interest. It wasn't a perfect victory for Odom, but against the IRS, it's the equivalent of winning six championship rings (suck it, Jordan). In the end, Odom received a large deduction that we're sure he used wisely.
Such as bribing E! executives to make a second season.
Related: NBA Games Are Gonna Be Weird
A Drug Dealer Deducts His Drugs
Criminals follow the law pretty leniently, but even they need to stay on top of their taxes; just ask Al Capone. Back in 1975, Jeffrey Edmondson was a drug dealer who was busted and charged with drug trafficking. The IRS, in the mood to add crippling financial debt to a prison sentence, audited Jeffrey for $17,000 in back taxes he needed to pay for failing to declare his income made from drug dealing.
"Sign here, here and here under confessi -- I mean conCESSions."
While awaiting trial, instead of trying to prove the innocence he didn't have, Edmondson filed a tax return that listed his taxable net income and a good list of business deductions, and left his occupation blank. That is because if any of the cops who arrested him found out he was a drug dealer, he would get into so much trouble. The act of putting only one's net income and amount of taxes due on a return is apparently a common practice for drug dealers. It's called the "Fifth Amendment" tax return and also goes by a lesser-known title, the "I'm a drug dealer, and I'll pay your stupid money if you agree not to tell anyone what I do" tax return.
Predictably, the IRS looked at his business deductions, then probably correctly assumed he was high on LSD and ignored them. Edmondson was serious, though, and his tax deduction would go on to the Tax Court. Despite having no receipts to back up his claims, which would've instantly cost him his chance for a deduction today, Edmondson apparently made a lot of sense. He claimed that he established a business in his home, which would've qualified him for a home office deduction, and he named several purchases -- including his drugs -- as necessary business expenses.
There's also the little known "bitches getting up in my grill" assessment.
Judge William Goffe was apparently very impressed with Edmondson's "honesty" concerning his illegal dealings, as well as his logic, so he agreed to deduct his expenses. Some of the things that were successfully deducted were a $50 scale, the cost of 29,000 miles on his car that were used to drive to pick up drugs, 100 pounds of weed and 1 million amphetamine tablets. If you think that was an absurd amount of drugs, you obviously didn't live in the '70s.
And if you don't ... can we please have your autograph, Mr. Richards?
After reading about this, it was easy for drug dealers to get excited at a new chance to save a lot of money that they could spend on hired muscle and flamboyant outfits. Also after reading this, it was easy for U.S. senators to get really pissed off at the ruling. Sen. William Armstrong, R-Colo., was displeased and made it a goal to prevent future drug dealers from having a nice tax loophole. He succeeded. In 1982, the senator managed to get a new tax rule added that disallowed any deduction earned in a business that dealt with the trafficking of illegal substances. So you'll need to go with the huge fake boobs instead.
For more people who walked around perpetually flipping the bird, check out 6 Comic Book Easter Eggs That Stuck It to The Man. Or discover the 9 Insane Cases that Prove the U.S. Legal System Is Screwed.