Company Automobile

[tacks]

Owner of daycare center buys van for $1,100; 97 ford astro; to cart children back and forth. Title is in her name.

Option 1 Owner sells the title to her corporation. Pay state sales tax on transfer of title. Corp uses standard mileage for van expense.

Option 2 Owner retains title. Vehicle is used by Corporation. Corp reimburses owner for Auto expense calculated by using standrd mileage. (i guess that i'd probably issue some 1099 to the officer reflecting amt she rec'd)

Option 3 Her auto insurance person suggested her person leasing auto to Corporation. While i see that has benefits in reducing owners liability it yeilds close to nothing in tax benefit (FairMarkt Lease value of van is minimal)

Would the IRS question Option 2? My fear is that if under audit the IRS agent would want to adjust from the larger Standard Mileage expense deduction for the very minimal Lease value expense deduction on a 14 year old van.

Any thoughts? What am i missing?

Thanks again in advance.

[clr]

The bigger picture

Option 1
The bigger picture here would be the liability if there is an accident and the vehicle is in her name.

[Jiggers]

Standard Mileage Rate

A corporation cannot use the standard mileage rate for a vehicle that it owns.

It can reimburse any employee/officer at the standard mileage rate, with proof of business miles. And no 1099 to the employee/officer. Not required.

Regarding insurance, "clr" has it correct about the liability.

[ttbtaxes]

You'd want option 2. Have the corporation reimburse the shareholder monthly for the miles he/she incurred as an employee. No 1099. Option 1 makes no sense and needlessly involves sales tax. Option 3 involves "self-dealing".

Keep it simple and use Option 2.

[Lion]

Accountable Plan

And, have the corporate officers "meet" to vote an accountable plan for expense reimbursements, noting it in their minutes.

[JohnH]

Definitely option 2. She will make money on the reimbursement because the standard mileage allowance is very generous. And the excess of reimbursements over actual expenses is essentially non-taxable income. One caution - pay attention to clr's point. She should tell her insurance company that the van is being used for business purposes. The extra liability premium will probably not be that much in the total scheme of things, and she will sleep better at night.