Awesome. It will save me the trouble. Let us know. I’ve been on a tear. Eight books during the last four weeks. Thought about RDPD, but felt dirty.
^agree on the advocating of fraud. In the book he really does say that his ‘business’ bought him a porshe. Reguardless, it does make me wonder about the merits of becoming a part time landlord.
I valued physician practices when I first got out of school and the stuff those guys run through their practices is ridiculous. Family members with no-show jobs, country clubs, vacations, you name it. One doc was even running a Rolls Royce through the books.
This is inline with what I’ve seen.
It’s still tax fraud, and it’s still illegal.
Sure, you can get away with some stuff for a while. But if the IRS catches you, you can go to jail.
It also depends on the CPA, too. The last one I worked for was as crooked as a question mark. He didn’t just look the other way–he actually advised clients on how to set up their lake house as an “employee benefit” and deduct all the expenses. If the IRS ever catches him (and they probably will, because he’s getting sued), he’s going to prison.
How is it tax fraud if it meets legal requirements? Why is Mr. X’s business rolls royce used to transport clients any different than Goldman’s Gulfstream jet? If Google sends its top executives to a business retreat in Aspen how is it different from a small business sending family executives there? I’m not saying it follows the intent of the rules in either case but if it fits the legal bill it’s definitely not tax fraud.
When it comes down to it, I still feel like I’m an advocate for the client, not the IRS. And I do try to come down on the client’s side whenever possible. (Letting them deduct 100% of their car, even though I know they use it for personal business, e.g.) But there’s no way I’m advocating a position that will land me in jail. And if I do, it certainly won’t be over e-mail.
Sure, I get all that but I don’t think these cases really strike me as fraud provided they fit the guidelines.
So they cheat the system to get more business? Similar to the the bartender that steals their employer’s booze and gives it to the customer in order to get a large tip.
Not quite, because billable hours benefit the business. Whereas the bar loses in the other scenario.
Again, let me refer you to the law.
“To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensible to be considered necessary.”
Is that vague enough for you?
The guidelines just are not as loose as some on this thread imply. A physician bought a motorhome to use as an office(wink, wink), while he was at the hospital. He was a partner in an independent practice. The IRS let him deduct the mileage from his house to the hospital and back. Not quite what he had in mind. Actual court case. The only part of a vehicle you would get to deduct for a rental property business would be mileage related to said affair or actual costs incurred unless it was used exclusively for business related matters. High audit triggers. Home office space deductions is another item they have been watching for years. Very specific ruels.
I don’t know man. Yeah it sounds great, I’ve thought through the same thought process, but from the people I know that have rental property it only takes 1 or 2 bad tenants to throw off your positive cash flow for a while, not to mention the cost of fixing things if you can’t do it yourself and have to pay a professional to do it. I don’t want to drag the never ending plumber debate in here, but it fits. You can also only depreciate the cost of the house, not the land, so depending on the valuation split that could change the numbers.
And throwing it into an LLC and not worrying about it won’t solve much. You’d still lose whatever you put into the house as a down payment, and if you don’t put enough capital into the LLC creditors could argue thin capitalization (thats CPA regulation shit coming back).
CPA Firm:IRS -> Bartender:Bar Owner
Tip:Bartender -> Billable hour:CPA Firm
You can’t say again if this is the first time you’re giving me a reference. Anyhow, I’m generally interested here, although this is very different from the understanding I’ve been given.
So are you saying this is or is not vague?
Because to me this does seem very vague and as long as you can point to some form of precident and make a valid case (ie, this was a business trip to discuss firm strategy and budget goals for the next year), it would be difficult for a reasonable expense to be held against you in a ruling.
In which case I’d have a hard time calling a company Mercedes or many of the expenses I listed fraud. Particularly given frequent precidents among small businesses.
Gotcha. I was thinkinig of the accounting firm as the bar and CPA as bartender.
As with anything, it is the case law that matters, not what you think the language implies.
Remember what you learned in high school–it’s only cheating if you get caught.
The same thing is true with tax deductions. Everything is deductible until you get caught.
If you take a tax deduction for something, you better be ready to back it up. Otherwise, it will get disallowed by an audit, and the IRS will recalculate your return, but including penalties and interest this time.
And if it’s bad enough, they’ll take you to criminal court.
To me, it’s not unreasonable to think that a Nifty Fifty company would have a company jet. To me, that sounds like an ordinary expense.
If Dr. Proctologist has a lake house (that worth 5x as much as his personal residence in Midland), a $150k outdoor kitchen, a $200k boat, and a $550k jet that carries him back and forth, and he’s trying to deduct this all as an “employee benefit”, then I’d be rather dubious, especially if he’s the only employee that gets the benefit.
FTFY