DRUGGIE SOUGHT TOO MANY DEDUCTIONS

Cocaine trafficker and personal loan officer Steven D. Ruddel had
unique ideas on tax deductions. Most of them arose out of a police
raid.

Officers had searched Ruddel's Hollywood, Fla., home and found 334
grams of coke, gold and silver coins, jewelry, $7,362 in cash and
weapons. They seized all this and the house.

Ruddel knew he was in serious trouble. So it didn't take much
persuasion for him to agree to participate in a sting operation in
exchange for a probated sentence. The drug trafficker also agreed to
pay $80,000 for expenses of police undercover work. Later he
repurchased the coins and jewelry seized from his home for $90,000.

When he filed his income tax return, Ruddel's imagination hit a peak.
He deducted the $80,000 as a charitable donation to the police
department and the $90,000 as a casualty loss.

The IRS gave the pusher high marks for creative thinking, but flunked
him on content.

Later, the judge in the case felt compelled to explain why he threw
out the deductions:

- -- A charitable donation is a transfer of money or other asset without
receiving any consideration in return, other than the incidental
enjoyment coming from the generosity. Ruddel didn't do this because he
is a generous guy. He got something for the $80,000 - he stayed out of
jail.

- -- As to the $90,000 paid for the return of coins and the jewelry, the
judge followed precedents set in prior cases. These earlier courts
refused deductions for assets forfeited because of illegal narcotics
activities.

Frustrated at every turn, Ruddel then challenged the late filing
penalty the IRS had imposed. He claimed he couldn't prepare his return
because the U.S. marshals threw out his records when they seized his
home. The judge allowed the penalty to stand anyway.

He said a person should file timely based on the best information at
his disposal. The taxpayer can later amend the return, if necessary.

The moral: You lose some, you lose some.