Scrolling through my Twitter feed, I saw this Promoted Tweet:
Nice try, @turbotax. There are some strange tax credits in this country but moving just because your house is haunted isn’t one of them. pic.twitter.com/c5nPp9qGFw
— H&R Block (@HRBlock) January 6, 2017
Curious, I looked to see what it was responding to. TurboTax, it turns out, will have a (pretty awesome, actually) new Super Bowl ad, starring Kathy Bates:
Basically, Kathy Bates sees creepy ghost-children throughout her house; on an app, she asks a TurboTax advisor if she can take a dependent tax credit for them. The advisor tells her that she can’t, but “you may be able to deduct some of your moving expenses.”
Bates replies, “Good. ‘Cause I’m gonna have to move again.”
Clever spot, well-shot, with at least one decent jump-scare. But is it accurate?
No, it turns out. Or, at least, probably not. In general, moving expenses aren’t deductible, because in general they’re personal expenses, and section 262 disallows deductions for living expenses.
There’s an exception, though: section 217 allows deductions for moving expenses. But.
Moving expenses are only deductible when an individual has a new principal place of work, and where that new principal place of work is at least further from her previous home than her old workplace.
So I guess technically the TurboTax advisor is right: it’s possible that Bates will be able to deduct her moving expenses. But nothing in the ad indicates that she’s changing jobs; she’s clearly going to move because, well, her house is haunted.
I mean, H&R Block’s tweeted response isn’t entirely accurate, either: even if the tax law has some strange credits, there’s no talk of a credit here. And H&R Block has messed up in ad campaigns, too: in 2012, they forgot that Bruce Wayne couldn’t fully deduct his charitable deduction if that deduction exceeded his AGI.
Still, in spite of imprecision and past mistakes, I’m going to award this Super Bowl (ad) victory to H&R Block. TurboTax’s ad is fun, but it’s also wrong.
The Surly Subgroup 
Fun post! I’m not sure we grade the same way, though: I think Turbo Tax won this one! I agree with you that Turbo Tax’s ad is technically right (though misleading, unfortunately). By contrast, H&R Block seems technically wrong, because the ad it’s referring to doesn’t discuss tax credits. Seems like basic confusion of deductions and credits, which but is disconcerting coming from a tax preparer.
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That’s a fair point, Leandra, though I’d probably rate TurboTax as wrong anyway, since it’s a factual issue, and they’ve arranged the facts to strongly imply that she’s moving because of ghosts. On an exam, a student would lose points if they found that Bates could deduct expenses.
Still, my revised grade: in this Super Bowl (ad) competition, they both lose.
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Taxpayers bear the burden to prove entitlement to deductions. INDOPCO. Since there are zero facts in the ad to suggest any job-related reason for the move, I don’t see how Turbo Tax is even “technically” right, unless by the “technically” you mean “assuming facts that we will just make up.”
Taxpayer also bear the burden to prove entitlement to exclusions. Schleier. Here, the TurboTax would be on firmer ground to suggest Bates might qualify for a partial 121 exclusion for any gain she realizes on sale of the haunted house. 121(a) generally requires taxpayers to both own a home and use it as their principal residence for 2 of the 5 years prior to sale. If a taxpayer meets that test, then 121(a) and (b) allow the taxpayer to exclude up to $250k of gain from the sale of the home. 121(c) provides that if a taxpayer is unable to meet the 2-in-5 test because of “unforeseen circumstances” then they can still claim the exclusion with the $250k benefit pro-rated to the period where they do both own and live in the home as their principal residence. The Service has ruled that when “a taxpayer and his wife” purchased a home, moved in together and in less than a year the woman gave birth, that was an unforeseen circumstance that qualified them for application of 121(c). PLR 200615011. If a married couple’s pregnancy qualifies as an unforeseen circumstance, then Ghostly children likely qualify as well.
Even MORE fun is to figure out how Bates could possibly HAVE a gain when selling haunted property. That, of course, depends on basis which in turn depends on how she acquired the property.
Forget about grading TurboTax. I just might use this fact pattern on an exam!
Yes, yes it was a fun post. Thanks for that!
-bryan camp
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Thanks, Bryan! The income exclusion was my first thought, too. I think you’d have at least an arguable leg to stand on if you moved after a single year because of ghostly children. I don’t know what evidentiary burden you’d have to bear, but I think the 45 seconds of film here would work.
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As far as Sam’s statement that the commercial is “technically” right (and my agreement with that), note that the ad doesn’t explicitly say *which* move’s expenses may be deductible. Ms. Bates starts the conversation with the TurboTax adviser with the statement “There’s a bunch of creepy kids in this house I moved into.” She asks about claiming them as dependents, saying “they were here when I moved in.” The adviser responds, “unfortunately, you can’t, but you may be able to deduct some of your moving expenses.” A completely plausible understanding is that the adviser is telling Ms. Bates that she “may” be able to deduct some of her expenses of moving *into* the creepy house. In fact, at the point when the tax adviser says that, no one, including Ms. Bates, has mentioned the possibility of another move. And the tax adviser is technically right–Ms. Bates may be able to deduct the expenses, depending on whether the move in was “in connection with the commencement of work” and the other requirements on IRC § 217 are met. Presumably, further questions by the tax adviser could suss out whether that move met those requirements.
Ms. Bates is pleased with the adviser’s reply, responding, as Sam said, “Good. ‘Cause I’m gonna have to move again.” The implication there could well be that she’s glad that the first move may be deductible because she’s going to have to shell out for a second move. That sure sounds like cold comfort to someone experiencing a haunting, but, after all, Ms. Bates didn’t call Ghostbusters, she reached out to TurboTax to find out if the haunted house came with tax benefits!
I’ll be interested to hear what you two think of this interpretation. I’ve watched the commercial several times now, and I do think it could seem to suggest that a ghost-related move may qualify (which is misleading), but I don’t think that’s the advice the adviser is actually giving.
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Hi Leandra, I see what you mean but I stick to my point. You are putting too much work on the word “may,” I think and using the term “technically” backwards. The advisory is only “technically” correct to say that Bates “may” be able to deduct moving expenses (either into or away from the home, it matters not) if by “technically” you mean “based on facts that we’ll just make up or assume or hope you can show later.”
IMHO the “technically” correct answer to Bates is that she may NOT deduct any expenses. That is because the little ole technicality that prevents deduction is the well established rule that the taxpayer may NOT claim a deduction or exclusion or credit.
I am not saying the TurboTax rep’s comment rises to the level of a sanction or anything. And it’s understandable. If a client comes to you, you might well say that the client “may have” a deduction and then you would go on to explain to the client what facts are needed and you would explore with the client whether those needed facts exist.
I am just saying that because the TurboTax rep’s comment is true only if there are certain facts that we don’t know about, it is, actually, technically incorrect. Bates may NOT take a deduction. I just don’t think you are using the term “technically” in the sense that I generally understand the term.
.
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Leandra, as I’ve been thinking about it, I think this is exactly the critical point: there are two assertions being made in the commercial (or, rather, there are two speakers and two audiences).
The advisor on the app, speaking to Ms. Bates, doesn’t say anything wrong. She’s absolutely right that Ms. Bates may be able to take a deduction for moving expenses. She probably can’t, because it doesn’t look like she plans on moving for work-related reasons, but the advisor could suss that out with further conversation (or maybe even TurboTax itself does the important work).
But there’s a second speaker and a second audience: the commercial itself (in all of its 45-second context) is speaking to the (mostly tax-unsophisticated) television audience. And the content and context of the commercial imply, very strongly, that when she moves, it’ll be for ghost-related reasons. And the commercial’s not going to do any follow-up with the audience to provide more context or ask additional questions. Rather, it leaves the Super Bowl audience (it claims, though apparently it was also on on the Golden Globes and maybe even just ordinary television) with the impression that moving expenses are generally deductible, or, at the very least, there are non-work-related moves that would allow for deductibility.
And while the first (the TurboTax speaker in the app) is probably technically correct, the second is wrong, in my opinion.
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Sam, I agree on both technical points. I notice, though, that you’re still referring to the possible future move that Ms. Bates mentions at the very end of the commercial. You don’t think the dialogue before that refers to the past move (into the haunted house)?
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Okay, I rewatched it and I take your point: the advisor may well have meant her move into the house. But Ms. Bates seems to interpret the statement as saying she’ll be able to deduct the move out of her house, since it triggers her declaration that she’s going to have to move.
So I’d say, after several watchings, it’s probably true, definitely ambiguous, and almost certainly misleading at best, especially where viewers probably don’t have a ton of in-depth knowledge of the tax law.
And again, it’s absolutely wonderful in every other way. It’s hugely entertaining and the production values are excellent. But it still feels, well, wrong.
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