Corp Ownership Question

[Golden Rocket]

One of the largest auto insurers in this state is the Tennessee Farmers Mutual insurance company. They will not insure vehicles for corporations. Period. Individuals only.

So a client goes out and buys a honking new truck, pays for it with corporate money, and puts the title in his own name (instead of the corporation). If he titles it to the corporation the insurance company will not insure it. Even if he uses a different insurance company, the insurance premium will be double if it is titled to the corporation.

Of course, he can't push around these giant insurance companies, so he tries to push around his tax preparer. He wants to depreciate his honker and take ALL expenses as if the corporation was the owner.

I believe the proper treatment for this is when the corporation PAYS for his truck, this is a dividend or a distribution. The owner must submit expense reports under an accountable plan to become reimbursed at the mileage rate, or in lieu of the mileage rate, the corporation can pay for all expenses and deduct them EXCEPT depreciation. It cannot deduct interest if the owner borrowed the money either.

Economically, the ramifications are disastrous for putting the vehicle in the name of the driver.

Comments??

[ChEAr$]

His real problem is that when using the truck for business, if something happens, insurance company won't pay.

Best advice is for him to sell the truck to the corporation and then find an insurance company that will insure it. To do otherwise is courting disaster.

Then, after truck is in corporate name he must account for personal mileage at least annually and impute value of such on his W2.

[Gretel]

I agree with Harlan, to a degree. I was wondering if insurance company is asking how much this vehicle is used for business? Mine does. Maybe it has more to do with a corporation than a business. I also cannot image that a huge insurance company would not insure all the cars for a huge corporation. Maybe the issue is a small corporation?

I would try get have in writing or on their form that this vehicle is mainly used for business. If necessary, switch insurer. Then create a lease agreement between shareholder and corporation, which compensates for all expenses including depreciation. Shareholder will need to file Schedule C for this income, which will be offset by all his expenses.

[Golden Rocket]

Schedule E

Gretel, surely you meant a Schedule E (not a C) to report the rent paid by the corporation to the owner. And then there is still the "personal" mileage which should either NOT be paid by the corporation or else put on his W-2.

And I thought there was a regulation against renting to a corporation that is 100% owned, unless the property was realty. ???

[Gretel]

Gretel, surely you meant a Schedule E (not a C) to report the rent paid by the corporation to the owner. And then there is still the "personal" mileage which should either NOT be paid by the corporation or else put on his W-2.

And I thought there was a regulation against renting to a corporation that is 100% owned, unless the property was realty. ???

You have to have arm length transaction, they are not prohibited per se. That is also the reason it needs to go on Schedule C, since you rent to a company in which you have a business interest. Besides, equipment rental never goes on Schedule E.

[ChEAr$]

Gretel, surely you meant a Schedule E (not a C) to report the rent paid by the corporation to the owner. And then there is still the "personal" mileage which should either NOT be paid by the corporation or else put on his W-2.

And I thought there was a regulation against renting to a corporation that is 100% owned, unless the property was realty. ???

Ron, rental of personal property goes to schedule c, and not to schedule e.