According to An Intuit Blog, these Five Brazen, Deductions Failed:
1) A home-office deduction for drug dealing In 1981, a Minneapolis drug dealer who sold substantial volumes of marijuana, cocaine, and amphetamines was arrested. He was later audited and owed $17,000 in back taxes from drug earnings that were never reported to the IRS. “The dealer appealed the audit, claiming that the IRS did not consider his tax-deductible costs incurred in running a business. He won the audit for a home office deduction, but still went to prison.”
2) Buffalo meat The professional bodybuilder who was allowed to wrote off the cost of body oil to make his muscles glisten in competition, also tried to writer off other expenses, such as vitamins, supplements and buffalo meat. Those deductions were denied.
3) Arsonist payments A furniture store owner had been trying to sell his business for several years. Fed up with trying to unload the business, he paid someone $10,000 to set the building on fire. He collected $500,000 in insurance money. He might have gotten away with the crime if he hadn’t tried to deduct the payment to the arsonist as a “consulting fee.” The IRS audited the man and the arsonist and sent them both to jail.
Happy tax day!