Celeb Tax Perks: Can Nelly Deduct His Grillz?

ByABC News
April 25, 2006, 11:17 AM

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."

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:

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.