S-corp deductions

[GTS1101]

Client had S-corp in 2010 and then closed the S-corp in 2011. I am doing the final tax return and the client used their s-corp business chevron account to pay for gas in their personal vehicle that was not registered or owned by the s-corp. The gas would have been for both personal and business use. I know that if they used their personal account to buy gas and submit an expense report to the s-corp they could be reimbursed for the mileage on their personal vehicle and the s-corp could write off. But since they used their business chevron account in the name of the business to buy gas on a personal car can they deduct that as auto expense on the s-corp? I would say no because the vehicle was not owned by the s-corp but I am wondering how others have handled this and if there is anyway they can deduct the expense.

Also in 2011 they often used their personal bank account to buy business expenses. Problem is they never submitted an expense report to the s-corp to be reimbursed for those business expenses. Those to me make more sense and I am sure they are not deductible because the s-corp did not pay or reimburse for them.

GTS1101

[appelman]

Sounds like one of my clients.

He likes to treat his S-Corp as if it were a sole proprietorship. I think your client, like mine, needs educating. Without making things any more complicated than necessary, I would say that the use of the company card constitutes a taxable distribution to the client, also subject to FICA or self-employment tax. If he is taking a salary, this would be part of his wages, and he could claim business use of the vehicle as an employee business expense on Form 2106.If there is no salary, and the client doesn't want to take one, the cockamany solution is a 1099-misc with non-employee compensation and a Schedule C, letting him report business use there. Nobody is ever happy with this last for an S-Corp shareholder, but sometimes, particularly when it's all long after the fact, it's the only practical way to go. I think the basic principal is that the shareholder must produce an accounting for business use of the vehicle either to the corporation or to the IRS.

[Lion]

Loans to Shareholder and Loans from Shareholder. Deal with any net as you close books, close the company.