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Tax court decision may lead to more Orange County tax deductions

One California woman with a house full of cats recently won a tax court battle that may have implications for taxpayers in Orange County and the rest of the country. The woman is a 59-year-old Oakland resident who lives in a modest 1,500-square-foot house that she used to provide care to about 70 feral cats as a volunteer for "Fix Our Ferals."

The woman attempted to take a $12,068 deduction for the expenses that she incurred working for the IRS-approved charity. She deducted food, litter, a portion of the utility bill, and veterinarian bills, among other things. The IRS disallowed these deductions and the woman challenged this decision in tax court and won.

"I was stunned," she said. "It feels great to have established this precedent."

Although the woman petitioned the tax court on her own, many taxpayers need the help of an experienced Orange County tax litigation attorney to successfully challenge the IRS' disallowance of a deduction. The 59-year-old woman was a former family-law attorney, so she was likely more experienced in dealing with the court procedures than a typical California taxpayer.

This tax court decision may have implications for more than just animal activists. The tax court decision helps clarify the rules surrounding the treatment of volunteers' unreimbursed expenses. There are 1.55 million IRS-recognized charities and many volunteers for these charities have unreimbursed expenses over $250.

Some tax experts believe that the decision makes it possible to deduct expenses incurred in events like hosting a catered fund-raiser for a charity, but it is probably best to consult with an experienced tax attorney before taking any deductions based on the precedent set in this case.

Source: The Wall Street Journal, "Stray Cat Strut: Woman Beats IRS," Laura Saunders, 6/11/11

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