Auto Deduction

[TAX]

Can client (S corp - Single Shareholder) buy a car under his personal name and take depreciation in business because he is using 50% or more for business?

How the car should be titled? Any tax planning here?

Thank you!

[joanmcq]

Sure, on Form 2106, employee business expenses.

[Jiggers]

Auto Expense

Sure, on Form 2106, employee business expenses.

Sure, if he can itemize and subject to the 2% haircut.

[Bees Knees]

Can client (S corp - Single Shareholder) buy a car under his personal name and take depreciation in business because he is using 50% or more for business?

How the car should be titled? Any tax planning here?

Thank you!

Have your single shareholder submit mileage records to his corporation under an accountable plan and have the corporation reimburse at the standard mileage rate. The corporation gets to deduct 100% of the reimbursement, and the reimbursement is tax free to the shareholder.

The corporation does not take any deduction for depreciation since the depreciation is included in the standard mileage rate that is being reimbursed.

The shareholder would then pay all costs of operating the vehicle out of his pocket.

[TAX]

Have your single shareholder submit mileage records to his corporation under an accountable plan and have the corporation reimburse at the standard mileage rate. The corporation gets to deduct 100% of the reimbursement, and the reimbursement is tax free to the shareholder.

The corporation does not take any deduction for depreciation since the depreciation is included in the standard mileage rate that is being reimbursed.

The shareholder would then pay all costs of operating the vehicle out of his pocket.

Thanks for answering. But I am still confused.

Here is the sitution.

Client wants to buy Heavy SUV under corporation name. So that he can get $25,000 sec 179 deduction. But, if he does buy under corporation name, his premium is doubled compared to buying the same car under personal name.

So he wants to buy this Heavy SUV under personal name. Use it 50% or more for business and cliam Depreciation under corpoartion. Can he do this? I told him in order to claim sec 179 the car must be under corporation name.

Please comment.

Thanks!

[Bees Knees]

So he wants to buy this Heavy SUV under personal name. Use it 50% or more for business and cliam Depreciation under corpoartion. Can he do this? I told him in order to claim sec 179 the car must be under corporation name.

If he wants corporation to claim depreciation, corporation has to purchase the property.

I have no comment on whether it is insurance fraud to have the corporation buy it but put his personal name on it.

[Deborah]

Cost of doing business

If your client wants to take the Sec 179 deduction - the truck must be in the corporate name and thus the insurance is business insurance and in the corporate name.

Another thing to consider would be is the purchase of a heavy SUV an ordinary and necessary business expense for the type of business your client has?

[abby]

another thread

http://www.thetaxbook.com/forums/showthread.php?t=6516&highlight=section

See above thread for a discussion of owner/shareholder and use of section 179 for automobile with personal use

[joanmcq]

Also, if bought under corp name, not only is insurance higher, but personal use must be included as wages on his W-2. And excess depreciation must be recaptured if biz use falls below 50%.

[RJM]

Why couldn't the owner buy a personal insurance policy for the corporate-owned auto, then get reimbursed for the expense under an "accountable plan". Won't the insurer do this?

[joanmcq]

Why would they insure a car to a person that isn't the owner? And if they hold themselves out to be the owner, isn't that insurance fraud? Liability issues?

[fliszt]

If Corp is sued

does the SUV become property of the court? And payable to the winner of suit?

[Bees Knees]

The reason you have insurance is so that the insurance company pays for damages. If you null and void the insurance contract by lying, they don't have to pay the damages.

Seems dumb to mess with that simply because you want a cheaper rate.

[RJM]

The corp owns the car, and it is an ordinary and necessary business expense for the corp, ie, if the corp did not offer this perk to the "employee", the employee would not take the job, or would require a larger salary. This perk is customarily offered to executives for both their business and PERSONAL use. Because of this, both the corp and the employee have an insurable interest in the car (property/casualty coverage) and in its use (liability coverage).

As long as the insurer is advised that the car is owned by the corp, the employee can secure the insurance coverage personally. In this situation, the corp is a "named insured" on the policy, along with the employee. Invoking a real estate term, this is a Mixed Use property. I know this works, at least with one insurer, because that is how my corporate car is insured.

Because the car is a corporate asset, and the corp is responsible for all costs of maintaining its property, the insurance is reimbursable under and accountable plan. All of the personal benefits are charged back to the employee under the Personal Use of Auto rules.

[Bees Knees]

As long as the insurer is advised that the car is owned by the corp, the employee can secure the insurance coverage personally. In this situation, the corp is a "named insured" on the policy, along with the employee. Invoking a real estate term, this is a Mixed Use property. I know this works, at least with one insurer, because that is how my corporate car is insured.

Good information to know. Except the original poster didn't want to tell the insurance company about it being a corporate asset, as the insurance rates were much higher. Why would the insurance company offer a better rate by playing this kind of game?