When your tax preparer tells you that you must meet the “letter of the law” in a transaction, you should heed their warning.
Congress has been challenging the IRS to close the “tax gap.” The tax gap is the difference between the amount of estimated money and what the IRS actually collects. The tax gap is the result of non-filers, under filers (those not reporting all of their income), and those people that file a correct return, but do not pay the full amount. In a recent court case, it appears the IRS has taken the stance that you dare not make a “foot fault” in taking a tax deduction.
In the case of Durden v. Commissioner (T.C. Memo 2012-140 (May 17, 2012) the Tax Court ruled against a couple that failed to follow all of the rules even though they were claiming a legal deduction. As you read the summary of this case, consider if you could be in a similar position with deductions you claim. This type of ruling can affect any type of transaction when you do not dot every “I” and cross every “t.”