The 'Epic Fail!' Case

http://www.ustaxcourt.gov/InOpHistoric/WALTHALLSummary.SUM.WPD.pdf

This case provides several examples of what not to do! The taxpayers deducted 30,000 miles (even) as a business expense on a schedule with no income or other deductions because they claimed that during their commute to their full time jobs they also looked at houses (from the outside only) that they might consider purchasing, fixing up, and reselling for a profit. They kept no mileage log or record of which houses they looked at and never actually made any appointments to see the interior of any house - much less any offers to buy houses or actual purchases of real estate.

The taxpayers were dead in the water and never should have pursued this in tax court. Commuting miles cannot be deducted even if you do something sort of like business along the way. Costs of investigating an idea to start a business/buy real estate are not deductible if you don’t wind up starting the business/acquiring the real estate. Beyond that, you must be able to prove the existence of a profit motive for any endeavor to rise to the level of a business thus enabling the deduction of related expenses.