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Dear Liz: My two brothers have taken over managing my 81-year-old mother’s two rental properties. They have told her that a ski vacation she paid for, which she took with their two families, is a business deduction. Same with many other credit card purchases. Are they putting my mother at risk?

Answer: Two other brothers have gotten a lot of heat for charging ski vacations to the company credit card. Their names are Mark and Andrew, and their dad’s name is Bernie Madoff. Ring a bell?

It is possible to combine a vacation with a business trip and deduct some of your own expenses. But writing off family members’ expenses, or even your own transportation costs if the trip was primarily for pleasure, isn’t smart. If she’s ever audited, your mother is going to have a tough time explaining how your brothers’ wine tab and her granddaughter’s skiing lessons qualified as a business expense.

The rules, which can be complicated, are laid out in IRS Publication 463, Travel, Entertainment, Gift and Car Expenses. But your mother clearly needs more than a pamphlet at this point. She should have her own tax professional, preferably a Certified Public Accountant or an enrolled agent familiar with rental property rules, to advise her and review her tax returns. Your brothers are playing fast and loose with tax laws and it’s your mother who could pay a big price if she’s ever audited.

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Categories : Q&A, Taxes

5 Comments

1

Presumably, she trusts her sons to do the right thing, because she taught them right from wrong. Their free-wheeling tax break attitude may well ruin the rest of her life. She could easily live another 15 or more years. If she’s audited the taxes & fees & interest from illicit deductions could cost her the comfortable retirement she’d planned for. Sadly, she’s trusted her sons & they’ve very possibly sold her out for a ski trip. I doubt if she did much skiing.

2

Under the circumstances, the first thing to do is to refile the taxes for that year at the very least. If the brothers won’t go along with it there’s a good case for elder abuse in the making here.

If the mom isn’t capable of getting a professional – might behoove other family members to do so. AARP also helps seniors with taxes at least at the most basic level, but it sounds like a pro can help her get out from under the errors by making a good faith effort to refile at least for that year. Might be worth the effort to do past year taxes. Yes, she might pay, but given the fraud perpetrated on her (even unwittingly, she’s still responsible for what she signs) she’s still well out of it. And if you want, you can contact IRS and see if there’s help for such a situation.

What I think is if the brothers know that someone is onto them they will go along with a good tax preparer in future.

It sounds like they are trying to cheat either because they think it’s all right, or to conserve her assets for themselves.

I hate people who prey on old people.

Also note if you turn in a tax fraud, you can get a reward based on a percentage of recovery.
If there is resistance – the IRS does prosecute tax fraud and likely will review the brothers taxes if given a hint.

I know, I know “they are family” – but with blood like that, you would benefit from some water.

Love to all.

This is disgraceful to be putting the mom at risk.

3

Hope my reply does not qualify as uncivil… but really – cheating an old lady and their mom at that… if it’s not ignorance it’s a terrible thing – and I still think it’s elder abuse, and that the fraud should be caught now while it’s cheap or even negotiable. You may like this post better than the previous.

Love to all

4

Although taking advantage of hard to enforce business tax law is not proper, I think it is quite a stretch to put them into the same category as Bernie Madoff, a man who ruined the livelihood of hundreds, if not thousands of people.

5

True. They’re apparently only taking advantage of their mother.