Celeb Tax Perks: Can Nelly Deduct His Grillz?

April 11, 2006 — -- Here's a mouthful: Several CPAs say if they were doing Nelly's taxes they'd treat the rapper's jewel-encrusted teeth -- celebrated in the hit "Grillz" -- as a business expense fully deductible on his income tax return.

Because show business is, in essence, the business of show, entertainers frequently have leeway to write off high-priced image-building expenses such as personal trainers, outrageous costumes, even plastic surgery.

The more outrageous the expense, the easier it is for a Hollywood star to explain it away, should the IRS call for an audit.

"I got my mouth lookin' somethin' like a disco ball," Nelly and co-singer Paul Wall rap in their hit single, an ode to their gen-encrusted dentures. Wall's oral ornamentation alone, featuring 65 princess-cut diamonds, is valued at $16,000.

"As nasty as that is, those Grillz are part of Nelly's costume. He uses them to promote his song and his stage act, so it's probably a business deduction," says CPA Shannon Nash, author of "For the Love of Money: The 411 to Taking Control of Your Taxes and Building Your Net Worth."

Who's On First? The Tax Man

As tax day approaches each year, taxpayers are often reminded of celebrities who famously ran afoul of the IRS. Willie Nelson was found owing the government $17 million in back taxes, penalties and interest after his tax shelters were disallowed.

The IRS seized Nelson's home and other assets. The country legend, who eventually paid the government back, later joked, "Seventeen million ain't much if you say it fast."

The long list of celebrity tax scofflaws also includes Pete Rose, who served five months in prison after underreporting $355,000 from 1984 to 1987, as well as Chuck Berry, Richard Pryor, and even Abbott and Costello.

In fact, Bud Abbott was forced to sell his 200-acre Encino, Calif., ranch, his wife's furs and jewelry, and was left destitute in 1959, after the IRS demanded $750,000. "The government took it all but the peanuts," he lamented.

Lou Costello, who died that year, had been set to star in a new comedy series, "It Pays to Be Ignorant," and while that wasn't a satire on his financial trouble, he never again had to ask "Who's On First?" On tax day, it's the IRS. Everybody else is on second.

Still, celebrities offer strange challenges for tax specialists, and Nelly's sparkling chompers are just the beginning. The Wolf Files sought the help of experts for the following tax questions:

Q: Can Paris Hilton Deduct Her Lap Dog Expenses?

These days, some celebrity wardrobes are incomplete without a canine accessory. Paris Hilton's most famous Chihuahua, Tinkerbell, might have lost lap time to Bambi, a smaller, more portable pooch. Nevertheless, Tinkerbell is a star in her own right -- and might be a business deduction for her master.

"I'd make the argument that Tinkerbell represents more than companionship," says CPA David Rogers of ActorsTaxPrep in Los Angeles.

"At this point, I'd imagine there are likely to be events that Paris is absolutely required to bring little Tinkerbell along, and so the dog then becomes a marketable part of her image."

In 2005, Hilton introduced $25 Chihuahua-sized dog collars, a move that could easily help explain away a portion of the pooches grooming, wardrobe and kibble as part of the cost of doing business.

As Paris explains in product literature: "In addition to my own sense of style, I think a lot of people admire Tinkerbell's look as well, which is why I decided to include a glamorous pet collar as part of the new collection."

Still, you'll be wearing an entirely different sort of collar -- personally fitted by IRS agents -- if you try to claim your pet as a dependent, even if your furry friend is otherwise considered a member of the family.

Can George Clooney Write Off Getting Fat?

Like a lot of stars, George Clooney has traded on his good looks, especially earlier in his career, when he played a hunky doctor on "ER." However, that doesn't mean he can start depreciating each new wrinkle on his face, now that he's no longer People magazine's "Sexiest Man Alive."

But Clooney might be able to write off the 30 pounds he was required to gain in order to play the haggard CIA agent, for his Oscar-winning role in "Syriana," if he needed professional help to get fat fast.

Likewise, if Clooney needs a special regime to diet down for "Ocean's 13," that's also a business expense.

"As a lawyer, I think it might help my career to join a gym, so that I look my best in front of clients. But performers are among the few of us who can get to deduct the cost of getting in shape -- or even out of shape -- if that's what a role calls for," says Los Angeles entertainment and tax attorney Bill Abrams.

Stars like Clooney are often in a position to expense trainers and nutritionists. And if he takes a part as a golfer, he may even require extra tee time with a pro to get into character.

The IRS clearly recognizes such professional expenses. But you'd better be able to make your case, if you get audited and want to pass yourself off as a part-time thespian preparing for roles as a day spa junkie.

Q: Is Star Jones' Breast Augmentation a Business Expense?

Normally, cosmetic surgery is not deductible. However, if you can prove you need breast implants to do your job, the government might just let you write off your cosmetically enhanced chest as if it were part of your work uniform.

In a landmark tax court ruling from 1994, exotic dancer Cynthia Hess -- better known as "Chesty Love" -- successfully sued the IRS to take a $2,088 deduction on a boob job that left her with a size-56FF chest.

U.S. Tax Court Judge Joan Seitz Pate noted that Hess increased her income as a result of the surgery and that her cumbersome breasts, weighing 10 pounds each, were so large that she could not derive personal benefit from them. Hess had undergone the surgery "all for the purpose of making money" at an Indiana strip club, and the tax court allowed her to deduct the expense as a "stage prop."

But this certainly isn't the blanket rule for all entertainers. "You have to be able to ask, is the surgery necessary to fill a specific role," Shannon says. "And, obviously, sometimes the answer is yes."

In Jones' case, she might have a tough time making the argument that it was a business necessity. But plastic surgery can be considered a medical deduction if it is done to correct an injury, ailment or birth defect.

When asked about the procedure late last month, Jones said, "Let's just put it like this . . . two weeks ago was my 44th birthday but my (breasts) think they're still 20." That might not be the explanation the IRS is looking for.

Q: Are Celebrity Gift Bags Taxable Income?

The best part about being rich and famous might be all the freebees. This year's Oscar gift bag -- including a Blackberry 8700c, a Kay Unger Kimono, 13 vouchers for free trips, a cultured Tahitian-pearl necklace -- was valued at $110,000, and even the IRS was licking its chops.

"As the world watches the glamour and glitz of the Academy Awards, it's important to keep in mind that movie stars face the same tax obligations as ordinary Americans," said IRS Commissioner Mark W. Everson in a press release just before this year's ceremony. "We want to make sure the stars 'walk the line' when it comes to these goodie bags."

Let's just hope best actress Reese Witherspoon remains legally blonde.

Buck Wolf is entertainment producer at ABCNEWS.com. "The Wolf Files" is published Tuesdays.