A taxpayer leases a car that is in his personal name. He uses the car 60% of the time for his business, and he wants to pay actual expenses, such as lease payments, gasoline, and repairs through his business and subsequently deduct 60% of those expenses on his Form 1120S. His company is an S Corporation. Can he legitimately do this? If so, what are the different ways that he can do it?
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The best way:
Client personally pays for expenses.
Client submits monthly expense reports and business percentage to corporation, and corporation reimburses that amount (Accountable Plan).
Corporation deducts reimbursed amount.
Not-as-good way, but probably acceptable:
Corporation pays for everything.
Client submits monthly expense reports and business percentage to corporation, and corporation reimburses that amount (Accountable Plan).
Corporation deducts business percentage of expenses.
Corporation adds personal percentage of expenses to wages (or possibly distributions).
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