Sole Prop to S-corp, vehicle expenses

[equinecpa]

Client formed an llc and elected to be taxed as an s corp in 2009, formally his business was operated as a sole proprietorship. Prior to 2009 he claimed actual expenses on business vehicle (freightliner). Business use is 100% but the vehicle is still titled to him personally.

What do I do for 2009? Vehicle is used by S corporation but owned by him personally. Do I prepare a schedule c claiming his actual expenses and then have the corporation reimburse him for those actual expenses as a lease payment?

Carolyn

[ChEAr$]

Client formed an llc and elected to be taxed as an s corp in 2009, formally his business was operated as a sole proprietorship. Prior to 2009 he claimed actual expenses on business vehicle (freightliner). Business use is 100% but the vehicle is still titled to him personally.

What do I do for 2009? Vehicle is used by S corporation but owned by him personally. Do I prepare a schedule c claiming his actual expenses and then have the corporation reimburse him for those actual expenses as a lease payment?

Carolyn

NO way. Isn't a "freighliner" a truck? Maybe not; I don' know.
First of all, there IS no S corporation, but an LLC simply electing to be taxed AS an
S corporation. So a schedule c is simply inappropriate; has nothing to do with present situation.

Now if this vehicle is a truck and titled was not transferred to the LLC, then there
are no deductions to be had. If it's not a big truck, but a listed vehicle, and still titled is not transferred to LLC, still no deductions unless the LLC has a reimbursement policy in effect to reimburse owner of said vehicle for mileage or actual costs.

Sounds like your client is out of luck, because when you deal with LLC, OR
actual corporation, you have to dot the i's and cross the t's.

[equinecpa]

Why wouldn't leasing assets to the corp to recover the "actual costs" be an option? Or are you saying in the absence of such a lease they cannot deduct those expenses?

Yes a freightliner is a truck - a big truck, used only for hauling a huge trailer.

[Gretel]

Sure they have the option to lease the truck to the S-Corp. and then report lease income on Sch. C if S-Corp. made payments and lease agreement is in place.

Having a reimbursable plan is another option.

I actually was thinking maybe a loan from the shareholder would work, you know, just making a JE to debit expenses and credit loans and pay him in 2010. It's iffy and won't work with reimbursable plan since it wasn't in place throughout the year.

[ChEAr$]

Leasing the truck may indeed be an option in the future, but unless there was a
lease in place for the tax year, it's still not a possibility.
That would be like back dating a document.