auto inclusion rules

[JoshinNC]

Opinions please:

Client is a S-Corp and shareholder of S-Corp wants to by new vehicle. Shareholder might drive 500 miles per year that are business related, all the rest are personal. Under normal circumstances shareholder would have to include on her W-2 inclusion for personal miles driven. But, what if S-Corp buys new vehicle and then immediately takes it to a sign/graphics shop and has the entire exterior of the vehicle wrapped in those graphics that are advertising for the business? That way each mile driven by the shareholder is also advertising for the business, and is therefore not required to be included on her W-2.

[Bird Legs]

Auto wrapped in messages

Sounds like a NASCAR race car.
Would say no as far as business expense. Why not just buy it in clients name and have a reimbursement plan for business miles driven.
This would be the easiest way.

[veritas]

My opinion

Nope...........

[JoshinNC]

Because we want to expense the entire cost of the vehicle

Sounds like a NASCAR race car.
Would say no as far as business expense. Why not just buy it in clients name and have a reimbursement plan for business miles driven.
This would be the easiest way.

It looks like a NASCAR car, but all the ads are for the company. Many companies, especially telecom (which this one is) are doing this with vehicles.

Veritas,

Please expound on your reasoning.

[Luis Mopeo]

Opinions please:

Client is a S-Corp and shareholder of S-Corp wants to by new vehicle. Shareholder might drive 500 miles per year that are business related, all the rest are personal. Under normal circumstances shareholder would have to include on her W-2 inclusion for personal miles driven. But, what if S-Corp buys new vehicle and then immediately takes it to a sign/graphics shop and has the entire exterior of the vehicle wrapped in those graphics that are advertising for the business? That way each mile driven by the shareholder is also advertising for the business, and is therefore not required to be included on her W-2.

TTB, page 10-5:

"Putting display material on a vehicle that advertises the taxpayer's business does not change the use of the vehicle from personal to business. Business use is determined by the trip."

[sea-tax]

TTB, page 10-5:

"Putting display material on a vehicle that advertises the taxpayer's business does not change the use of the vehicle from personal to business. Business use is determined by the trip."

Sorry Josh I have to agree with the others on this, it is not deductible just because of the advertisement.
Luis beat me to the punch.

[JoshinNC]

answers my question

TTB, page 10-5:

"Putting display material on a vehicle that advertises the taxpayer's business does not change the use of the vehicle from personal to business. Business use is determined by the trip."

Thanks Luis!

[Lion]

Miles

He can deduct advertising for his business if usual and necessary; i.e., the cost of the "wrapping." But he can't deduct his personal mileage, because it's still personal mileage, except maybe for the trip to the sign shop!

[Bees Knees]

Sometimes having the corporation provide a company car to the shareholder is a good idea. True, the value of the car supplied to the shareholder who in turn uses it for personal purposes must be added to the shareholder’s W-2. However, the value added is not always the actual cost.

For example, say the company pays 100% of the cost of operating the vehicle, including gas. The FMV of the vehicle is $20,000, and the shareholder drives the vehicle 30,000 per year for personal purposes.

Under the Lease valuation rule of figuring the amount to add to the shareholder’s W-2, the employer adds $5,600 (from table on page 13-32 in TTB), plus $1,650 for gas supplied by the employer (30,000 X 5.5¢ per mile). Total fringe added to W-2 is $7,250.

The employer’s deduction for actual cost is $2,960 for first year depreciation, $4,500 for gas (30,000 ÷ 20 miles per gallon X $3 per gallon), plus $1,000 for insurance plus $400 for other miscellaneous repairs, oil changes, car washes, etc. Total actual cots = $8,860.

The employer takes a deduction of $8,860 but only has to add $7,250 to the employee’s wage.