Fortunately, you can often arrange your affairs -- legally -- in a way that lets you derive considerable personal benefit and enjoyment from business expenditures.

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Be careful if you deal with relatives. An IRS auditor will look askance at payments to a family member or to another business in which your relatives have an ownership interest (in tax code parlance, these are termed "related parties"). An auditor may suspect that taxable profits are being taken out of your business for direct or indirect personal benefit in the guise of deductible expenses. For example, paying your spouse's father, who is in prison, $5,000 as a consultant's fee for your restaurant business would smell bad to an auditor.

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