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Tax code allowed deductions for body oils, office parties, and feeding stray cats

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Tax breaks for whaling ship captains, feeding stray cats and holding office parties for low-wage employees all have been ruled legal under tax law, according to a new report that comes just as the debate over so-called “tax expenditures,” estimated to be worth as much as $1 trillion a year, is heating up.

While much of the focus has been on corporate breaks to the likes of oil companies, the individual income tax code has its share — and Sen. Tom Coburn, Oklahoma Republican, wants those to be part of the conversation as well.

On Monday he released a 600-plus-page report designed to show how to reduce deficits by $9 trillion over the next 10 years, including trillions of dollars in lower tax breaks. And alongside it, he obtained a report he requested from the Congressional Research Service, Congress’s nonpartisan analytical branch, laying out some of the crazier-sounding write-offs:

— Eskimo whaling ship captains, who can deduct up to $10,000 a year. Even though commercial whaling is illegal in U.S. waters, Native Alaskan captains are still allowed to hunt, and since 2005 are also allowed to claim the annual charitable deduction to offset their fuel and weapons costs.

— Businesses can deduct the full cost of “recreational, social or similar activities” for low-paid employees — which means the costs of office holiday parties can be written off.

— A couple who owned a junkyard got tax court approval to deduct the $300 they paid to feed stray cats. The court said since the cats kept away snakes and rats, it boosted business. CRS said it’s “not clear from the ruling how widely applicable it is to cases involving the feeding of feral cats.”

“We need to cut spending inside the code as well as spending outside the code,” Mr. Coburn told reporters as he introduced his $9 trillion plan.

The CRS report found some other particularly questionable business deductions, including one tax court’s ruling that a bodybuilder could deduct the cost of the oils he used, and another court’s decision that an exotic dancer’s large silicone breast implants be a deductible expense.

That second court ruled that the implants bought by the dancer, whose professional name was Chesty Love, were so large — about 10 pounds each — that they could have no purpose other than for her professional work. The implants were assigned a five-year depreciation life.

CRS said those tax rulings don’t necessarily create a precedent, so it’s not clear whether another exotic dancer could make the same claim.

Also deductible on tax forms as medical expenses: costs of a legal abortion and costs of a sex change operation when someone has been diagnosed with gender identity disorder — but, unlike in the case of the exotic dancer, not breast implants. The U.S. Tax Court ruled that the augmentation surgery was mainly for appearances, not actual treatment for the disorder.

Many of the breaks are small. The whaling deduction totals $4 million over the next 10 years, for example.

But Mr. Coburn argues they are emblematic of a gap in government responsibility, since the tax code doesn’t receive the same sort of annual congressional oversight that spending does.

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