What happens when a promoter is investigated?
A. The government may file suit against the promoter to stop him or her from promoting the scheme. The court has ordered home-based business promoters to turn over to the government a list of their clients who purchased and/or participated in the abusive tax avoidance scheme. Q. Can an individual avoid being subject to penalties if they relied on their return preparer or someone else who promoted the abusive scheme? A. Reliance on the advice of a promoter does not guarantee avoidance of penalties. See Tax Court case Peete v Commissioner TC MEMO 2004-31. (PDF) Q. Is it wrong to deduct costs associated with businesses, including home-based businesses? A. The law allows individuals to claim legitimate business expenses. In order to be deductible, expenses must be ordinary and necessary expenses paid and incurred in carrying on a legitimate trade or business. A business must truly exist prior to claiming business-related expenses. Q. Can certain personal living expenses be deducted in conn
