There
was no contract, no invoice, and no evidence the family agreed to pay him
anything. Sure, Anthony gave round-the-clock care. The family would have hired
round-the-clock nurses if he hadn’t been there.
If you find yourself taking on
the responsibility of a caretaker to your elderly parents, are you documenting
your efforts? If you are giving time and money for the care of loved ones and
would like to take tax deductions for your efforts, you ought to make sure you
brush up on your bookkeeping skills. Otherwise, when it comes to tax time, you
may be out of luck (and money).
The case of Estate of Olivo v.
Commissioner is most instructive.
Forbes examined the Olivo case in an article titled “Mother's Day? Son Claims $1.2M Tax Write-Off
For Helping Mom.” From the title of the article, it is clear that the son
may have been a bit generous in his claim. To make matters even more
interesting, the son was a tax attorney.
Background: Anthony Olivo was
the son/tax attorney. He took nearly ten years away from his law practice to
care for his parents. Accordingly, Anthony lost his law practice income.
However, he did collect fees from his parents for managing their estates. When
Anthony’s mother died, he sought to deduct $44,200 in administrator’s fees, $55,000
in accountant’s and attorney’s fees, and a whopping $1,240,000 for a
near-decade’s worth of lost wages (he did manage his own firm, after all).
The IRS raised an eyebrow, and
then raised it further when they took a look at his documentation of all of
these fees and amounts. Problem: there was no contract, no invoice, and no
evidence. Not good.
Even when Anthony was handling
the estate and filing the tax return he didn’t keep track of his time and just
estimated. Also, not good.
In reality, not everything
claimed may have been deductible. Nevertheless, the lack of recordkeeping
killed any chance for success.
If you and your loved ones are
entering a period of caregiving, then a little forethought and planning can go
a long way. In the end, a little recordkeeping can be the deciding factor in
making your claim.
For more information and articles on
estate planning and elder law topics, please visit our website
and sign up for our free monthly e-newsletter. You can also friend
our law practice's Facebook page (R Christine Brown). #ElderCare #ElderLaw #TaxLaw
Reference: Forbes (May
8, 2013) “Mother's Day? Son Claims $1.2M Tax Write-Off
For Helping Mom”