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Game Offers Tax Advice To Rappers: Write Off Strippers, Sneaks And Medical Marijuana

Dec 29 2013, 11:36pm CST | by , in News

Game Offers Tax Advice To Rappers: Write Off Strippers, Sneaks And Medical Marijuana
Photo Credit: Forbes
 
 

The Game may be a successful rapper but his tax advice leaves a little bit to be desired.

Born Jayceon Terrell Taylor, Game was discovered by Dr. Dre in 2003. His debut album “The Documentary” went on to sell over five million copies, reaching double platinum status. Since then, Game has gone on to be nominated for two Grammy awards and a number of Billboard Music Awards.

So, when it comes to music, he knows his stuff. When it comes to taxes? Maybe not so much. You see, Game was out last night in Los Angeles when he was asked a few questions by the paparazzi about taxes. His response?

“Taxes? You can write off d*mn near anything, man.”

When prompted to “name the top three things” that rappers could write off on the taxes, Game had these answers:

  1. “You can write off strip clubs… making it rain.”
  2. Buying Jordans.”
  3. “You can write off buying medical marijuana.”

You can see the whole exchange here.

As always, Game is entertaining. Only he’s not exactly right.

To claim a deduction for business expenses, the Internal Revenue Service requires, at Section 162 of the Tax Code, that it be “ordinary and necessary.” According to the IRS, an ordinary expense is one that is common and accepted in your trade or business. I suspect that paying a stripper is pretty ordinary in the entertainment/rap business… but is it necessary? The IRS defines a necessary expense as “one that is helpful and appropriate for your trade or business.” Patronizing a strip club might be helpful and appropriate for his image so it might be possible to write off club entry fees (I said might) but those dollars for dances? The IRS is going to argue those expenses are entirely personal. And “making it rain” – the act of showering a stripper with dollars – is fairly expensive: remember that you cannot deduct expenses that are lavish or extravagant.

But back to that entry fee and other club-related expenses. Could any of that be deductible as a business expense? Entertaining a client or having a meeting at the club could be deductible as entertainment expenses so long as the primary purpose is business. The expenses must meet also either the associated test or the directly-related test:

  • To meet the associated test, the entertainment must be associated with your trade or business and that entertainment occurs directly before or after a substantial business discussion. This could happen. Could. Likely doesn’t. But then I’m not hanging out with Game so I can’t say for certain.
  • To meet the directly-related test for entertainment expenses, you must show that the primary purpose of the entertainment was to conduct business; that you did engage in business during that time, and you had “more than a general expectation of getting income or some other specific business benefit at some future time” as a result of the expense. Entertainment expenses are not generally considered directly related if there are substantial distractions that prevent you from actively conducting business. I might have been to a strip club or two in my lifetime (or – clearing my throat – maybe I’ve heard things) and there are a number of substantial distractions. I don’t think, in most circumstances, you meet the directly-related test in a strip club.

Next, those Jordans. Clothing is deductible if the only purpose of the clothing/uniform is for business purposes (meaning that you must wear them as a condition of employment) and not suitable for everyday use. Clothing is not deductible if you could wear it outside of your workplace (even if you don’t). Those Jordans? Not merely for business purposes. And Game would totally wear them outside of business. As would half of America. It’s how Michael Jordan stays a bazillionaire.

Finally, that marijuana. I’m sorry: “medical marijuana.” Medical or no, you generally can’t deduct expenses which are illegal, no matter how easy they were to come by or what your “doctor” – I mean, doctor – had to say about it. At Publication 502, the IRS makes it clear that medical deductions are not allowed for illegal substances, even when prescribed by a doctor:

You cannot include in medical expenses amounts you pay for illegal operations, treatments, or controlled substances whether rendered or prescribed by licensed or unlicensed practitioners.

And despite the fact that medical marijuana is legal in 20 states and the District of Columbia, it remains illegal on a federal level. But just to be sure you understand, the IRS confirms in Publication 502:

You cannot include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc.). Such substances may be legalized by state law. However, they are in violation of federal law and cannot be included in medical expenses.

So there you have it.

I’m not a rapper (trust me on this, my kids have heard me try) but I do know a little something about taxes. Strippers, Jordans and medical marijuana may big rapper expenses – but they’re not tax deductible. Or, to be more precise:

Nobody likes to pay taxes
But it’s not gonna to fly
To claim deductions on your 1040
For the cost of getting high./>/>/>

And those sneaks you’re wearing?
Those Benjamins paid for strippin’
Won’t fly with IRS -
They’ll simply say you be trippin.’/>/>/>

(I told you I’m not a rapper.)

Want more taxgirl goodness? Pick your poison: You can receive posts by email, follow me on twitter (@taxgirl) hang out with me on Facebook and check out my YouTube channel. You can also subscribe to the podcast on the site or via iTunes (it’s free).

Source: Forbes

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