Tax Court Views Ballpark Guesstimates As Fields Of Dreams
If you are involved in a money-losing side activity (or money-making if your income is over the NII threshold), try to keep contemporaneous records of the time you spend. Ideally, you should cross-reference the time log with invoices and e-mail print-outs, and vendor invoices. Of course, if your goal is to be featured in one of my blog posts, it might not happen, since there is a decent chance that you win at appeals. Whatever you do, never refer to whatever reconstruction you come up with as a “ballpark guesstimate”. That will cause you to strike out.
Strong Language In Partnership Agreement Might Help With Expense Deductions
The other lesson is more subtle. It would be a good idea for professional partnerships to look closely at the expense language in their agreements. Particularly in partnerships with “Eat what you kill” compensation structures, the agreement should be very clear that partners might be expected to spend money on all sorts of things that might not be reimbursed.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.