P'Ship like S-Corp cannot deduct auto ins unless?

[AZ-Tax]

P'Ship like S-Corp cannot deduct auto ins unless?....either entity rented or leased the vehicle OR owned the vehicle, correct? Partner using personal vehicle could be reimburse for ins with an accountable plan, correct?

[DaveinTexas]

Auto Worksheet

AZ, my tax software (I'm not saying that because the software lets me do it, it must be right) allows me to apply an Auto Worksheet on the Partner's 1040 against the earnings from the Partnership's K-1. In essence, you are deducting Unreimbursed Partnership Expenses (UPE) as another method of deducting an expense incurred on behalf of the Partnership.

If you go the UPE route, make sure the Partners include in the Partnership Agreement (what's that??) a statement that, "No expenses incurred by the partners on behalf of the partnership or whilst performing services for the partnership will be reimbursed by the partnership." Or some type of language such as that.

OR, you can have the Partnership reimburse the partners, but make sure (as you stated) to have in place an Accountable Plan. Just insert this type of verbiage in the Partnership Agreement and make sure the Partners keep dubious records such as a mileage log. This will prove the business percentage of the auto insurance, fuel, repairs, etc. They will just love all of this record keeping!

Lastly, make sure the Accountable Plan, if they choose this route, is specific to the types of expenses that will or won't be reimbursed as to not to cause confusion if the IRS were to attempt to "determine the accuracy of the items reported on the return", AKA an audit.