Trucking along, S Corporation

[DaveinTexas]

Hi all,

I have a client who owns an S Corporation (1 shareholder). The client's husband is a truck driver. The S Corporation pays wages to the husband trucker (HT?) as well as per diem for overnight travel.

They want to purchase a newer truck this year but no dealership will extend credit to the S Corp to finance the truck. So, the truck will be purchased by the husband. What would be the best approach in order for the Corporation to take deductions for this vehicle?

1. Setup an accountable plan and have the Corporation reimburse fuel, maintenance and repairs?

2. Rent the vehicle to the S Corporation and have the Corp pay for fuel, insurance, repairs etc?

I am hesitant to go with method 2 because the husband will be the owner of the truck and the employee of the Corporation. I am reading on page 18-8 of the 2010 Taxbook and it says, "Payments made to employees for equipment that is required as a condition of employment are taxable wages, unless the amount is paid under an accountable plan." Rev Ruling 2002-35.

If method 1 is the way to go, can the Corp also reimburse the husband for the truck's insurance, 2290 tax and licensing fees? If you don't like either method, I am willing to hear other ideas.

TIA and have a great day!

[veritas]

How about

having the corporation cosign the loan?

Renting to the corporation can limit your depreciation options ie: no section 179.

[DaveinTexas]

Great question

having the corporation cosign the loan?

Renting to the corporation can limit your depreciation options ie: no section 179.

That is one of the options on the table, the client did mention the dealership would want the taxpayer on the hook if the loan went unpaid. I will try to persuade them to do that if possible.

Good point about the depreciation limitation.

[ChEAr$]

I've never had an S corporation client try to buy a truck and finance it where the lender would not deal with the corporation. Sure, they wanted shareholder/driver's personal guarantee, but no problem there.

Perhaps he needs to seek out a different lender.

[DaveinTexas]

personal guarantee

Yes sir, the client did mention a personal guarntee was required by lender. I think the transaction will head in that direction.

Thanks all.

[Davc]

As a side note if the truck is in more than one state during the year I hope the required state returns are being filed. The Amtrak Law applies to the husbands wages, but not to the Corp itself or any K-1 income on the 1040.

[kpangelinan]

I've never had an S corporation client try to buy a truck and finance it where the lender would not deal with the corporation. Sure, they wanted shareholder/driver's personal guarantee, but no problem there.

Perhaps he needs to seek out a different lender.

Yeah, this has been my experience as well. I've had many, many clients get a loan through their corporation and be the personal guarantor and have never had one that said no.

[Jiggers]

"I have a client who owns an S Corporation (1 shareholder). The client's husband is a truck driver. The S Corporation pays wages to the husband trucker (HT?) as well as per diem for overnight travel."

Is the "per diem" for meals? If so, that is OK.

If the "per diem" is for lodging, I don't think that the corporation can pay the 100% shareholder per diem for lodging. Actual expenses must be used.

I would also hope that the truck isn't a "sleeper" truck where the driver has sleeping quarters. That would amount to double-dipping.

And the truck should be titled in the S-Corporation name, and the shareholder is just a co-signer of the loan. I see this done all the time.

[kpangelinan]

"I have a client who owns an S Corporation (1 shareholder). The client's husband is a truck driver. The S Corporation pays wages to the husband trucker (HT?) as well as per diem for overnight travel."

Is the "per diem" for meals? If so, that is OK.

If the "per diem" is for lodging, I don't think that the corporation can pay the 100% shareholder per diem for lodging. Actual expenses must be used.

I would also hope that the truck isn't a "sleeper" truck where the driver has sleeping quarters. That would amount to double-dipping.

And the truck should be titled in the S-Corporation name, and the shareholder is just a co-signer of the loan. I see this done all the time.

Agreed with all points here.....MOST of my truckers sleep in their rigs and for those returns I prepare, they get "zero" for lodging (actual expenses for lodging if overnight is required), but per diem amounts for food.

[DaveinTexas]

Meals only

"I have a client who owns an S Corporation (1 shareholder). The client's husband is a truck driver. The S Corporation pays wages to the husband trucker (HT?) as well as per diem for overnight travel."

Is the "per diem" for meals? If so, that is OK.

If the "per diem" is for lodging, I don't think that the corporation can pay the 100% shareholder per diem for lodging. Actual expenses must be used.

I would also hope that the truck isn't a "sleeper" truck where the driver has sleeping quarters. That would amount to double-dipping.

And the truck should be titled in the S-Corporation name, and the shareholder is just a co-signer of the loan. I see this done all the time.

Good point to bring up, the per diem is only for meals, not lodging. I will pass along all of the great advice you guys always provide.

Thanks all!