Overdone Overdrafts
If you own a business and are in a bit of a financial pickle, do NOT do what this couple did!
They owned a dry-cleaning business and were judged as bad credit risk, so they couldn’t get a loan from the bank. So instead of trying to fix their bad credit score, they did the exact opposite by regularly overdrawing their account and then satisfying it after the bank called them. Yeah, you can probably see where this is going…
Due to their financial negligence, they incurred more than $30,000 a year in overdraft charges, which they obviously tried to write off as a business expense. The Tax Court did not agree with them and, eventually, they had to file for bankruptcy.
Billing Mommy
This is another grueling story that takes a bizarre tax turn. When a wife was found guilty of murdering her husband she was sent to prison. Despite being named the primary beneficiary of his 401(k) plan, her crimes barred her from receiving that money.
Instead, the account was paid to her son since he was the secondary beneficiary. Still, since his mother was first he claimed that she should pay taxes on the payout. That’s clearly not how taxes work, so the Tax Court swiftly denied his claim.
Letting Others Burn Down the House
If you ever want to tear down your house, you should consider contacting your local fire department. They could burn it down for you and actually use it as a training exercise. You can also get a tax deduction but only if the value of your donation exceeds the value of the demolition services provided.
One homeowner tried to do this and then swiftly found out that actually, his home’s value was negligible since it was meant to be destroyed anyway to make room for a new home. In any case, it did not exceed the value of the demolition services and thus the Tax Court denied his charitable deduction.
