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Wednesday, October 26, 2005

Fun with Taxes!

Calarco v. Commissioner, 2004 WL 1616387: a decision in three Acts (including a prologue and epilogue and funny footnotes)!! Tax law makes you insane:


From the Prologue:

This case follows in that long, but little-noted, tradition. Petitioner, N. Joseph Calarco, is a respected professor of theater at Wayne State University in Detroit. He also writes plays. On his 1997 tax return, he deducted his playwriting expenses as a Schedule C business loss. Respondent disallowed both the loss and several itemized deductions that petitioner took on his Schedule A. These disallowances created a deficiency of $3,869 to which respondent added an accuracy-related penalty of $774. Petitioner, following the lead of Henry VIII's first Queen Katherine, [FN11] filed a timely petition in this Court . . .


From the Second Act

In extreme cases, this can even lead to a kind of deduction fever:
"Itemizing? What's that, Satan?"
"Well, you see, Josh, now that you're not just a salaried copy editor but also a freelance television critic, you can file a Schedule C and deduct your legitimate business expenses....
So I went home, waded as usual through the pot smoke of my roommates, shut the door, and looked around my room. What was a "legitimate business expense"? Okay, I'm a television critic, so ... the television! Yes! Because I need something to criticize!
Okay, so the television ... And then--yeah, the VCR, because I can't watch every episode of "T.J. Hooker." ...
And, of course, the videotapes.... And the replacement labels for the tapes, which I get from Radio Shack.... Oh---and the TV Guide, which guides me to the television! ... And the books of television criticism I've bought. And actually, the books I've bought that aren't television criticism: they've still informed my criticism of the television.... Oh---and the chair I sit in, of course: very important what your posture is when you criticize a television. And the food I eat--which literally makes up the cells that form the critic of the television....
Kornbluth, supra.

Petitioner has fallen victim--at least at times--to this fever, claiming many quotidian activities, such as reading newspapers and renting movies, to be "business-related". He is, at some level of abstraction, no doubt correct. But we must administer the tax laws as they are . . .


From the Footnotes:

FN22. See Master of the House on Les Miserables: Original Broadway Cast (Geffen Records) (suggesting benefits of enhanced substantiation requirements for certain innkeepers).

FN24. Although best known to tax lawyers for his rule, George M. Cohan was also a playwright, actor, and songwriter, who wrote such stage classics as "The Man Who Owned Broadway." His life outside tax litigation was the source material for the classic Jimmy Cagney film, Yankee Doodle Dandy (Warner Bros.1942). (We also note that this year marks the centennial of Cohan's breakout role in Little Johnny Jones, featuring Yankee Doodle Boy (I'm a Yankee Doodle Dandy) and Give My Regards to Broadway.)



The Epilogue:

Dramatists used to finish with some rhymes, Mostly iambs with a pinch of dactyly, But in these more prosaic times Works usually end more matter-of-factily.
In our Court, though, the oldest ways seem somehow to survive--
A decision will be entered under Rule 155.


... Makes you go insane, I say.

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