K-1 Deductions

[rwm221]

I filed a Partnership with k-1's Since they haul heavy equipment with their trucks. The prior tax person depreciated their trucks so I did the same. They made twice as much money as they had in previous years so obviously their SE tax was higher. They consulted another person about how much they owed and the other person said that they should not depreciate their trucks, but write them off on their personal return.
I don't know where they would write them off if they only have a k-1 for income.

Thanks

[TaxGuyBill]

Who owns the vehicles? The Partnership or the individual Partners?

[spanel]

I filed a Partnership with k-1's Since they haul heavy equipment with their trucks. The prior tax person depreciated their trucks so I did the same. They made twice as much money as they had in previous years so obviously their SE tax was higher. They consulted another person about how much they owed and the other person said that they should not depreciate their trucks, but write them off on their personal return.
I don't know where they would write them off if they only have a k-1 for income.

Thanks

Should not depreciate, but "write them off". Is that not the same thing???? It will be the same thing if the trucks values are close to each other or one partner will actual owe more and one will owe less if different. I'm not sure you can deprecation equipment from the 1040 side... or at least its more difficult anyway if its allowable. (my software does not help with this as I just create another k/1 with the partners expenses not paid by the partnership, so I cannot pull up a deprecation schedule, just a negative line on another k/1)

Maybe this "other person" should give a bit more info

Chris

[terryats]

I use ProSeries, and we have a schedule E worksheet for unreimbursed business expense. In early years it was at the bottom of page 2 of schedule E, but now it is a separate worksheet

[Lion]

In general... If the partnership owns the trucks, the partnership can depreciate the trucks, using any method available to the partnership. If the individual partners own the trucks AND IF the partnership agreement specifies that the partners will use their personal trucks for partnership work, then the individuals have an expense on their individual Schedules E as others have explained. Read the partnership agreement. Know the ownership of the trucks. Check on if the insurance coverage includes partnership work use. Ask the partners questions, so you can explain their options. If those options differ from "the other person," then tell them to get an IRC cite from "the other person."

If this is a new client who will question everything you do, you might want to decline the engagement now.

[rwm221]

this is a father and son partnership. Prior to this year is year the father has a sole proprietorship. One of the trucks that the father used had been depreciated. The second truck the son bought and used foo hauling the grader.

[TaxGuyBill]

Are you saying the father owns it, NOT the Partnership?

If so, it does NOT go on the Partnership return. As Lion pointed out *IF* the Partnership Agreement requires it, then the father would deduct the cost as "Unreimbursed Partnership Expenses ("UPE") on his Schedule E.

[rwm221]

If the father depreciated the truck when it was a sole proprietorship can he take miles on the schedule E as reimbursed partnership expenses?

[TaxGuyBill]

No, unless he used the Standard Mileage Rate in the first year the vehicle was available for ANY business, he must continue to use Actual Expenses.

But I suspect the best option is for the Partnership to set up an Accountable Plan, have the father submit monthly expense/mileage reports, and then have the Partnership reimburse those expenses (or reimburse using a mileage amount, up to the Standard Mileage Rate) every month.

[rwm221]

So you mean take the truck out of the partnership and off of the schedule E and have him submit mileage to the partnership for reimbursement?

[TaxGuyBill]

Yes. Then the Partnership would deduct the cost of reimbursements.