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Clothing and the rich - Page 6

post #76 of 157
It all about looking respectable, not price. With that being said, I think the bare minimum for a senior ranking executive to spend on a suit is $1K to make the cut. The lowest priced, highest quality, best designed suit I can think of to fit this criteria are the Corneliani RL blue label suits.
post #77 of 157
First point: Your tax deductions are illegal, Linux Pro. I'd put a halt to it, as it raises red flags. Second point: It is rational to judge a human being by their dress, at least to the extent that it is inefficient to actually get to know the person. It is simple Bayesian rationality. This does not mean that it is rational to trust Mr. Expensive Suit more than Mr. Cheap Suit. Depending on the situation, it might be more rational to trust the latter more. But, the point is is that judging by dress is rational.
post #78 of 157
Mike C.: You'd be surprised what suits some CEO's of Fortune 500 companies wear, some are busting out Brioni and Saville Row bespoke, and others are wearing 10 year old HSM, Arnold Brant, and Oscar de la Renta suits.
post #79 of 157
Mike C.: You'd be surprised what suits some CEO's of Fortune 500 companies wear, some are busting out Brioni and Saville Row bespoke, and others are wearing 10 year old HSM, Arnold Brant, and Oscar de la Renta suits.
Drizz... I don't doubt that for a second.
post #80 of 157
I should admit to something here... my clothing is generally picked (or at least assistance comes from) my girlfriend, because I trust her taste sometimes more than my own (I am a math major after all). Heh heh. And I regularly shop ebay trying to find deals on good suits, although it looks as though the 3-piece I just grabbed might be a piece of crap, and it was $300. The formulae I used to determine offset of depreciation by interest gained on investment are at home, and I am at work (supposed to be working rather than posting on a style forum). Basically, it goes like this: Capital = approx. $60,000 on car depreciation over 3 year term = approx. 20%, bringing value of good to $48,000. I make payments of $1500 per mo. to my investments. Capital after first year should equal approx. $21,420. After second year, capital should equal approx $46,900. At end of third year, capital should equal approx. $77,200. That is crude, because I do not have the monthly formulae that I used to calculate interest compounded monthly on payments. But it is close. Also, I used a very basic calcuation at 19% annual growth (and also erroneously calculated the interest on the first year of capital as if all capital was invested in lump sum at begging of term, which it is not). I will see much higher growth than that on my investments however, because 50% is invested into my forex account which is currently returning approx. 80-200% annually (last year, it returned 287%, although the previous year only 97%). Over a month-long term, it is not uncommon for my forex engine to give me 1500 pips of growth (although at times it will giveback a hearty 700). Total Amount of capital expenditure: $114,000. Capital value at end of term: $125,200. Total cost of ownership for 3 years on car: -$11,200 Car will be written off also as it used primarily for work (we use my girlfriend's IS300 for personal travel). This is completely legal and totally spelled out for you on the IRS website. As is the use of deductions relating to "tools", and other expenses - such as client dinners, which are considered entertainment, I believe. Every year that I file my taxes, they are audited first by a friend of mine who is an auditor at an accounting firm, and he is very rigorous (and expensive). I have had no issues with the IRS to this point, and have contacted them specifically to clarify whether certain items can be claimed, and specifically explained how I was doing it. If I am audited by the IRS at some point, I am not too worried, because I keep receipts of everything, and to the best of my knowledge I am doing nothing illegal, have no intention to, and take every precaution in order to remain in compliance with their regulations. Most people are not aware that business expenses are business expenses, and should be counted as such. If you are using a suit primarily to conduct business, and it is a significant purchase, than you are purchasing a tool for business use and it qualifies as such. Also, Enron's accounting practices had little to do with taxes. Rather, they were grossly misstating their earnings, and filing 10q's and 10k's which were highly inaccurate. The executives and board members came under federal investigation when it became clear that they were directly involved in knowledgeably and purposefully "fudging" their earnings in order to deceive investors and influence the value of their stock, and then giving themselves massive stock grants, which they would liquidate at these falsely inflated values. This is a wholly different crime than tax evasion, or any tax code violation, and it was the SEC and the FBI who investigated, rather than the IRS.
post #81 of 157
Linux, your deductions for your car, etc. sound perfectly legal. But -- and I am NOT giving legal advice here -- I can tell you for certain that you cannot deduct clothes as a business expense unless the clothes would be totally unsuitable for non-business wear. In other words, if you were a clown, you could deduct your clown outfit. You cannot deduct the cost of your suits, no matter whether you bought them solely for business use, and no matter whether you use them solely for business use. I am not challenging the ethical nature of deducting your clothes as business expenses; I am simply telling you that it is not a good idea to do it. It is 100% not allowable -- there is indeed a judicial case addressing the precise question (involving Yves St. Laurent clothes, in fact) and there was a thread discussing the question on either this board or AskAndy about six or eight months ago.
post #82 of 157
Thread Starter 
linux: Are you sure this friend of yours is really your friend? Just cause he's expensive, doesn't mean he's right on this. There was an article in the LA Times recently where they talked about these millonaires who used very expensive accounting firms to make really aggressive deductions, which the IRS still deemed to be illegal and the fines wiped them out. Some of the deductions you're making are more than just really aggressive, they're illegal. Ignorance is no excuse for breaking the law. And, it doesn't matter if you have receipts when you're making illegal deductions. You cannot count clothes as an business expense. That's just wishful thinking. As for the car, yes it can be written off. But, I wonder if you're misintrepting the IRS like you've misinterpreted using clothing as a deduction. If you're using it to drive to work to the office, you cannot write that off as a business expense. And, I have to disagree with a 20% deappreciation. Its probably going to be much more than that. And, I don't think you can make the assumption that since you'll continue to reap in the same profits in all your investments.
post #83 of 157
From my own experience as an IRS audit target: business suits are NOT a legitimate business expense. Neither, unfortunately, are a Mitsubishi television, subscriptions to local newspapers, and dry cleaning expenses. All of these deductions were disallowed during my audit.
post #84 of 157
I appreciate the advice John. I had been considering not filing those deductions on this return, because it does not save me much anyway, and I was rather unsure about it. The last thing I need is a conviction on some bizarre tax charge, which would pretty much derail my career, so I try to stay pretty upfront with everything. I just hate the idea of not taking an exemption or deduction which is valid. I know many people who file clothing, cars, watches, PDAs, laptops, etc (almost everyone I know), but some of them also deduct some rather questionable things - such as a dinner out on the town on a Saturday with their wife and kids. My auditor told me that certain types of exceptions raise flags, and those who claim the most exemptions annually are most likely to get the non-random audits. Even the tax attorney here at our firm tells me that much of our tax code is a little arbitrary in places, leaving a little too much room for liberal interpretation, and can leave you scratching your head at times. Of course, he always says it is better to err on the safe side.
post #85 of 157
Just to reiterate what's been said at least twice already, you cannot deduct the cost of your suits as a business expense.
post #86 of 157
I deduct the car because it is used solely for business: i.e, driving to client locations, delivery of contracts, etc. If I did not use the car for business, I would not have purchased it (most likely), because I live in the Metro region and would prefer to save money by walking and/or taking transit. Actually, the car fits perfectly into the description provided on form 1045 or whatever it is (I don't remember off the top of my head). After reading this thread, I definitely plan on not writing off business attire on future filings. Holy cow. My auditor told me to be careful with it, but never mentioned some of what I've read here.
post #87 of 157
As to a bizarre tax conviction, my conversations with IRS auditors leads me to believe that a person will never run horribly afoul of the IRS via extraoridnary deductions. You'll get the deductions disallowed, be charged the tax and interest and penalty, but unless one is filing clearly frivolous returns, the deductions will not get you even into a court. They REALLY frown on people who don't list all their income. That's where the conviction part comes to play. On the other hand, an acquaintance of mine simply didn't file income tax returns for more than 10 years. He was largely self-employed at the time, although in a real estate business which reported his income to the feds via 1099. When they finally caught up to him, he reported all his income, took what deductions he could, and ended up settling with the IRS for something less than 10 cents on the dollar of what the taxes, interest and penalties totalled. Makes me wonder.
post #88 of 157
Dakota - that is hilarious about the television. What did they say to you during the audit? How did you respond?
post #89 of 157
In the mid-90's, after college, I was doing some investing and didn't claim any of my activity, and that kind of worries me a bit. It was nothing big, I think the total amount I made was somewhere around 10 or 20k. I was just lazy at the time and couldn't find my papers and filed without that info. I figured if they had access to it, they would find it and take it out of my return that year. That's really the only time I messed with my income figures, and I've regretted it since. I'm always wondering if I'll get a letter or something about it. I really should say no more on here. Is it really wise to discuss tax tactics on a public forum on the internet?
post #90 of 157
The whole thing was just a mess: the original IRS auditor who had my file wasn't in the office the day I was to go under the microscope. It was about 30 degrees below zero, and a lot of people weren't in their offices that day. I get shuffled to a different auditor I'll call "Pat" (yes, like THAT Pat on SNL.). (S)he started asking questions about what this deduction was, and that one. That's when I learned about the local daily newspaper thing. She finally 'fessed up that the reason I'd been audited was my income didn't match up with 1099s that'd been filed, particularly a $50,000 disbursement from the Oxnard Harbor Authority or some other obscure public body. Turns out I had had a tax-free bond "called" that tax year. I hadn't reported the face amount of the bond because it was the same as the basis, so no gain. In the end she asked for receipts from two different categories of my return: business equipment purchases and my entertainment and lodging. I'm about the worst receipt-keeper in the world, and had only about 10% of what I needed, so I asked her if she'd accept copies of checks. Sure, she said. So I photocopied all the checks I could find (which coincidentally totalled the same amont I'd deducted ) and headed back to her office. When she was going through the checks, she stopped at one in particular. She must've sat there for five minutes looking at this one photocopy. Finally she slid it across her desk to me and said, "I don't think this one is going to fly." I looked at it and noticed on the memo line "Mitsubishi tv". I explained I needed it to view videotapes of resort properties some of my clients had interest in. "Where is this tv?" she asked. Since it was in my family room at home, I just smiled and said, "you know, I think that was an accounting error. You just can't trust QuickBooks anymore, can you?" She kind of laughed and dinged me for about $1200. The postscript to the story is that on my way out of the IRS offices, the receptionist kind of smiled and asked how everything had gone. I told her it was nerve-wracking, a little embarrasing and not something I ever wanted to go through again. "You know," she said. "It's really too bad Ernie (the original auditor) wasn't here when you first came in. He's retiring next month, and has been going REALLY easy on people." Lesson: I push my deductions to the max (within reason) and I make darn certain all my income is on the return. And the worry one goes through between the receipt of the "your file has been pulled" letter and the actual audit is WAY worse than the audit itself. Just don't be stupid about your deductions.
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