Over the past week I've had a chance to speak with seven of my good friends who are professional accountants. Here's what I asked them: "What were some of the craziest deductions claimed by clients this tax season?"
Now, I promised not to reveal any names – of either the tax pros, or their clients – to protect the innocent. I have to say, I've seen a few of these deductions before, but even I was surprised by a couple of them. Time will tell whether Canada Revenue Agency will go along with these deductions and credits, but in every case, the tax pro made the claim at the client's request because they believe, wholeheartedly, that the amounts are being claimed within the tax law.
Here are the top crazy deductions in 2015.
Pet travel costs
In this case, a gentleman is making an earnest attempt to earn business income from a new type of dog leash he's invented that helps to train puppies to heel. It worked on his own puppy, so he's been travelling the continent demonstrating the product. He's been flying his puppy with him, incurred some unexpected vet bills along the way and has purchased food to feed Fido. The fact is, our tax law allows a deduction for any costs incurred for the purpose of earning income from a business as long as they're reasonable in amount.
Cosmetic surgery cannot generally be claimed (unless required for some medical reason). This year, a woman claimed capital cost allowance (depreciation for tax purposes) on the cost of her breasts because she's an exotic dancer and believes her tips will be bigger (pardon the pun) after the procedure. While I can't find a court decision in Canada to support this as a business deduction, I'd say this self-employed dancer has a good argument. Further, for what it's worth, a U.S. court decision in Hess v. Commissioner sided with the taxpayer on the same issue south of the border.
A woman who works for a micro-brewery is entitled to one free case of beer every month. Most employees love the perk even though it's a taxable benefit and shows up on their T4 slips. But this woman doesn't like the stuff. So, she waives her right to the beer by giving it to other staff members. She claimed a deduction for the value of the beer on her tax return because her employer still insists on including the taxable benefit on her T4.
This one I hadn't heard before. A gentleman paid a hefty sum to kidnappers to have his business partner released. Now, if we were living in the United States, kidnapping ransoms are explicitly allowed as a deduction by individuals (as a loss from "theft") – no kidding. In Canada, I don't see any way to deduct a ransom personally, but in this case, the ransom was paid by a business, arguably for the purpose of earning income from the business (since the partner was crucial to the success of the business). So, I'm giving a thumbs up to this deduction.
A young man has been competing in body-building competitions for the last three years. He looks pretty fit to me, and obviously judges agree. He's won a few thousand dollars at it. CRA would argue that his winnings should be taxable because they are based on a special skill. He's reporting his winnings as business income, and claiming expenses against this income – including a ton of body oil.
Paying a lover
A man was moving to a new city in a move that qualifies him to claim moving expenses. While he's not married, or living common-law, he's seeing a woman who helped him in his move. He paid some professional movers to help out, but also paid her a reasonable sum to help in the move as well. Her income is much lower than his, so this provides a deduction for him and is taxable to her. She then treated him to dinner and some gifts with the money she earned. The real loser here is the taxman.
This one may not fly with the taxman – but it's worth a shot. A gentleman had a tattoo on his belly when he underwent bariatric surgery that was medically critical to allow him to lose weight. He then had skin removed from his abdomen as part of the procedure, leaving his tattoo half gone. So, at his doctor's recommendation, he paid to have the rest of the tattoo removed using laser treatment, and claimed this as a medical expense.
Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author and founder of WaterStreet Family Offices.