James Smith of North Carolina pled guilty yesterday to tax evasion. The government charged Smith with mischaracterizing his transactions with Soft Touch Promotions, a prostitution ring. He deducted the payments as business deductions and classified them as meals and entertainment and advertising.
Now, I can see where someone might classify this as entertainment. But in that scenario you would only be able to deduct half of the $700 per hour charge and you would need to document who accompanied you and the purpose. I really don't want to think about any meals Mr. Smith was eating.
But Advertising? Unless Mr. Smith has a Red Clay Industries tattoo in a place only visible when the clothes come off, that seems destined to be discovered under audit. Although, since the Charlotte Observer says he is in the construction industry, maybe he felt it necessary to show off his wood.
Now, I can see where someone might classify this as entertainment. But in that scenario you would only be able to deduct half of the $700 per hour charge and you would need to document who accompanied you and the purpose. I really don't want to think about any meals Mr. Smith was eating.
But Advertising? Unless Mr. Smith has a Red Clay Industries tattoo in a place only visible when the clothes come off, that seems destined to be discovered under audit. Although, since the Charlotte Observer says he is in the construction industry, maybe he felt it necessary to show off his wood.
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