Discussion:Business use of a vehicle - advertising?
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Discussion Forum Index --> Tax Questions --> Business use of a vehicle - advertising?
| 8 August 2007 | |
| A shareholder of S corp places a company logo or advertisement sign on his personal vehicle and uses that car for personal purposes. Can company write off the monthly payments on the car and classify it as an advertisment expense? Or can those miles be considered business miles? Does the company have to report personal usage allowance on W-2?
Any input is greatly appreciated. Roman. | |
| 8 August 2007 | |
| no, no, yes
The advertising deduction would be limited to the cost of the sign or sticker. | |
| 8 August 2007 | |
| This needs to be included in the "urban tax legends" category, along with the deduction for the loss of a kidney when you wake up in a tub full of ice and find out that the hooker you accepted a drink from last night stole it and left you a cell phone with a note "call 9-1-1" | |
| 8 August 2007 | |
| (no kittens were killed in answering this question, but I'm sure the IRS wanted to.) | |
| 8 August 2007 | |
| But, if you sew a "Mary Kay" patch onto the chest or behind of your evening gown, it will be deductible as a uniform, won't it? | |
| 9 August 2007 | |
| I can't remember the case but the Court disallowed a TP's yacht that had his company name on it but was for personal usage. | |
| 9 August 2007 | |
| The "company-sign-on-car-makes-all-driving-business" issue has been litigated many times. To my knowledge, the IRS won every case. | |
| 8 September 2007 | |
| While it has been litigated, the facts of each case may lead to a different result. For example, a complete vehicle wrap is an entirely different animal as compared to lettering on a rear window, decals, magnetic decals, etc. There are many factors that make the argument much more likely to succeed when seeking to expense out the vehicle expenses as legitimate advertising expenses. | |
| 8 September 2007 | |
| ha ha ha ha, Recraig, go ahead and get a PLR if you are so certain. We'll all applaud if it goes through. | |
Michaelstar (talk|edits) said: | 8 September 2007 |
| Not! | |
TheTinCook (talk|edits) said: | 8 September 2007 |
| Based on all the great advice on this topic, I've decided to get sign for my car to promote my practice. I think I'll go with something like this:
| |
Michaelstar (talk|edits) said: | 8 September 2007 |
| Not going to get past the IRS on audit! | |
Death&Taxes (talk|edits) said: | 8 September 2007 |
| I always wonder about the brains of people who put stickers all over new cars and what this does to resale value, and I am not talking about business advertising. In the case of a wrap, I could not see anyone with a head on their shoulder doing this unless the business use of the vehicle was extremely high, and therefore the point largely moot.
Anyone fmailiar with Foxtons, or The Geek Squad. The people who work there usually drive Minis, or small VWs and featured prominently on the doors are the company name. Foxton people seem to have racing stripes on the Minis too. [for you in the West, Foxton's is a real estate brokerage that charges far less than the going 6-7% rate to sell your house, so as you know, real estate people think real estate as soon as they leave the house]. The Geek Squad does IT work. | |
| 8 September 2007 | |
| How about the personal injury lawyer who named his $200,000 yacht "Whiplash"? | |
Southernbellecpa (talk|edits) said: | 8 September 2007 |
| Black Kevin is right on: No, No, Yes indeed! "(no kittens were killed in answering this question, but I'm sure the IRS wanted to.)" LOL! | |
| September 8, 2007 | |
| the first sentence answers the post, 'on his personal vehicle and uses that car for personal purposes', business use is business use, Kevin did good summary , no, no, yes, but it's still interesting to comment more,,,, btw tincook, don't forget to put company name on sign, LOL | |
TheTinCook (talk|edits) said: | 9 September 2007 |
| I could only afford two signs. The one with my logo is on my yacht. | |
| 19 September 2007 | |
| Hey all. New to the board. I find this thread an interesting one.
If I had a sole-proprietorship that was paid by the mile by clients to display advertising on a vehicle, I could deduct the cost (or percentage of total costs) of the mileage I was paid to drive...correct? I would assume no different than a corporation with business owned vehicles (mobile billboards) taking the same deduction. (the vehicle I use is for business purposes at the time of driving the paid miles) It seems like if your contractural agreements were in place, and your paperwork was in order, this is allowed. Love to get some advice on this. I will write more after some comments are received. | |
| September 19, 2007 | |
| I would agree that if you're being paid to drive it for advertising, it's a different deal.
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| 19 September 2007 | |
| I am designing my Mobile Tax Van (aka camping van for the lake] as we speak. Can I qualify it as a qualified non-personal use vehicle? | |
Death&Taxes (talk|edits) said: | 19 September 2007 |
| And I suppose you will store your music book inventory in it?
Mr. Corley, you don't happen to be a NASCAR driver? I do wonder if there are any requirements such as minimum mileage in these contract. If not, aren't they really only renting space? | |
| 19 September 2007 | |
| No, I'm sinking the entire inventory when I get to the lake. Didn't have the flair fot it D.T. | |
| 19 September 2007 | |
| D&T has probably seen some of the trucks which are specially designed for advertising, as they are not too uncommon here at the shore. They feature ads on rolls on the back and side panels. Companies pay them to drive around, and about every 30 seconds or so the ads change. Such vehicles would be fully deductible to the companies that own them, but this is a far cry from putting a sign on a personal automobile. | |
Death&Taxes (talk|edits) said: | 19 September 2007 |
| Right, Mr. Ref....we also have the banner planes. Problem with the idea is that unless the company putting the ad on the vehicle tells the driver a route to drive, the driving is still personal.
Maybe I need a bi-plane to tow over the beaches hauling a big 'DEATH & TAXES' sign. It could follow the one that offers crabs and clams at Bum Rogers' restaurant. Trouble is tax season is not beach season here. | |
| 19 September 2007 | |
| Yes, I think the only way around the personal is to have it be a qualified non-personal use vehicle. Now, Im sure some of these food vendor wagons are as such. But I've got to strike just the right balance on my mobile tax van. I do plan to install a real seat for myself, and a fold-down jump seat for my girlfriend, in further efforts at compliance. | |
| September 19, 2007 | |
| I'm going to start a pilot "bike school bus." (Two adults ride their bikes along a predetermined route, pick up kids on their bikes along the way and escort them to school.) Now, if I charge a fee to do so, I can write off my bike, and my son's bikes, right? Didn't we have this discussion once before? | |
| 19 September 2007 | |
| Now we are getting some good discussion. Thanks all.
Lets say you have Company(SP) A that operates a website. All expences for that business are deductible on it's Schedule C. You also have Company(SP) B that dables in mobile advertising. All expences for that business are deductible on it's Schedule C. All income and expences are kept separate as required. Both SP's are legit (ie DBA names) and the money actually flows from business to business. Under a contractural agreement between business A and B, most (if not all) of your vehicle mileage could be a business expense for Business B. More thoughts? | |
| 19 September 2007 | |
| Natalie....
You are implying that you could not have a busness that used a bicycle to take a kid to school for hire. You could totally do that. | |
| September 19, 2007 | |
| That's true. I actually have ridden to a few client meetings on my bicycle. But I really wouldn't want to charge for the bike school bus. We really need to motivate people to ride bikes more, and charging them money to do so is not going to work very well. (In fact, some might argue that they should be paid for riding on our not-so-friendly roads around here.) | |
Actionbsns (talk|edits) said: | 19 September 2007 |
| One thing that is missing in this discussion of hiring out a truck to be used as advertising and making it deductible is the aspect of income. If you are hiring out your vehicle as an advertising source to someone, they are paying you and there is income, your business would be called something similar to what billboard advertising is called. Your car is not an advertising expense to you, but it would still be a business expense to your business since you need it for that form of advertising. The expenses would, I think, be for painting the sign or installing one of those high tech gizmos to change the message, gas to be used as you drive around, depreciation, repairs and maintenance, insurance - but hey, I think those are all the expenses you have with the business use of your car anyway. The customer would, then get the advertising expense, but it's not their car. So in order to make this work for each of us, we would probably need to be a separate entity, corporate would be best, that is hiring the other entity, possibly a SP, that then files it's own separate Schedule C. Would that work? Would it even be worth the effort? | |
Death&Taxes (talk|edits) said: | 19 September 2007 |
| Think about what you just wrote: you mean if I take today off and drive my Outback to Cape May for the day I will deduct the expense of that trip against my second business if I have the car swathed with advertisements? Or when we drove to Maine last month, or grocery shopping or to the post office? What about at night if I am driving a road with no lights? Since you can't take the wrap off the car very easily, are you really saying every mile is business? And if this ends with a loss, will the loss be deductible? | |
Actionbsns (talk|edits) said: | 20 September 2007 |
| No D&T, I'm not suggesting you can just go out and do this at all. Just thinking the process through the only way it could happen if someone were to actually do what is suggested earlier and set up their vehicle as an advertising business. It's probably best that it not be our tax practice businesses if we are the drivers as well. Recently I saw some huge trucks that have the trailer rigs painted as massive, moving billboards. The owner of a rig like that, must be offering them up for advertising to others for a fee, which is income, then you would have offsetting business expenses for that vehicle as it relates to that use. As for driving your Outback anywhere, if you had signed a contract with someone to have all that advertising on it and you are required to drive it around to advertise, how do you determine what trips are personal and what is "business"? Your other questions are provocative, and I don't know what the answers would be. But if you had it set up as a business and ran it as a business, seems like at some point you might have a loss. Personally, I think it's a lot of silliness just to get a little advertising expense when, as a business, all those expenses related to the vehicle are available to you anyway. | |
Death&Taxes (talk|edits) said: | 20 September 2007 |
| I suspect they would not pay enough to meet the costs of the vehicle....why would they? Thus I would question the profit motivation of the owner of the car on his 'separate' business. I would see it as revenue to offset the business use of auto, or in the case where there was little or no business use, an activity not engaged in for profit unless the payment per mile was so outlandishly high to cover the cost of the car and then some.
Do remember the company with a rig on the road sporting advertising is using it 100% for business anyway. | |
| 20 September 2007 | |
| Now why would the IRS wanna kill kittens in answering this? I love my cats :P
Hilarious discussion, though. Reminds me of some of the crap I hear. Funny one is that a Mary-Kay salesperson or somesuch can deduct mileage of a trip as long as they give out a business card at the destination, like at a mall. | |
| 20 September 2007 | |
| Yesterday, I had individual tell me that there current accountant allows them to deduct 100% of their auto because they are on call. Is this true? No personal calc.? | |
Death&Taxes (talk|edits) said: | 20 September 2007 |
| That current accountant is dangerous. No way this works.
People [firemen etc] used to deduct the base cost of their home phone for being 'on call' then Congress legislated this out by saying no portion of the base cost of the home telephone can be deducted. | |
| September 20, 2007 | |
| I always wondered what started the first-line home phone rule. What a bummer. | |
Actionbsns (talk|edits) said: | 20 September 2007 |
| I agree, the Mary Kay situation is problematic. I do have this discussion with one client every year who sells some kind of supplements - mostly for her own use, but has been told by the company that pretty much whispering the name of the company in a group of people, makes everything tax deductible. At least in my scenariou above, the person involved had the decency to create a separate business as a mobile advertising agency. That's what the business would be called!!!! Mobile Advertising Inc. Car is still not an advertising expense though. | |
Death&Taxes (talk|edits) said: | 20 September 2007 |
| I did a no-no and Kevin may yell at me; I made a statement without giving documention, so Natalie and you other youngsters, Congress put Sec. 262(b) into the law effective 12/31/88.
Before then, some preparers made 'telephone on call' almost an automatic Employee Business expense....remember that before 1987 there was no 2% threshhold rule. I recall this issue coming up on an audit of a hospital administrator; the auditor sneered when she saw 'telephone on call' and said, 'my husband is a fireman and he does not deduct telephone on call.' 'Lady, we're not arguing about what your husband does or doesn't do. Is his name in the Internal Revenue Code?' | |
| 20 September 2007 | |
| Re: first line telephone rule, any deduction everybody gets in similar amount is silly tax policy. Just adjust the tax rates, also benefitting non-itemizers and/or nonbusiness t/p's, and leave the dumb complexity out of it. | |
Actionbsns (talk|edits) said: | 20 September 2007 |
| JR, you can have the meals, now how do we get all our other living expenses especially during tax season when we are more than "on call". That's when it never leaves us, we are working 24 hours a day. We can cite our own code, just give it a number. | |
| 20 September 2007 | |
| Buy meals for office staff and call it office expense....100% deductible....who are office staff? US!!! Or call it an office party but no one is invited....
hehehe; I am getting silly I think...time for the blender :) | |
| 20 September 2007 | |
| I love Sam's club, why it's amazing the things you can find there, tires, food, wine......all the things it takes to run a civilized office these days. A few strategic drops of coffee on the receipt; and don't forget the Sam's club mattress for the IRS agent (I keep a King Size for the bigguns) to take a little snooze on as he "labors" in the conference room. Pure silliness, of course, silliness. | |
| September 21, 2007 | |
| That phone thing bothers me. So, let's say someone runs a business out of his or her home and gets (what else?) a business line because of the added benefit of a yellow page listing. Now that line costs about $30 more per month than a residential line, but the IRS still says it is not deductible. How can they allow people to take a 50% deduction for business use of auto or home office expense and not allow the business portion of a phone line?
And, now we have cell phones. So I'll bet there are plenty of people out there who have dropped their landlines altogether and are writing off their cell phones as business use. Just another instance that proves taxes are not fair. | |
Death&Taxes (talk|edits) said: | 21 September 2007 |
| Natalie: the law refers to the base cost of the first phone line in the residence. If you can show bills where detailed listing of calls shows business, or perhaps you add Answer Call, or Call Waiting for business, you will definitely be able to deduct the listed calls, and probably will be able to deduct services put on for business. Of course, it might be easier to add a second line, which many do for their fax. And it is not IRS that is being the bogeyman here, but Congress. In 1988 when this was put into law, the cellphone was in its infancy. And I believe cellphones are subject to Section 274 rules anyway. | |
| 21 September 2007 | |
| My understanding is that cell phones are listed property and subject to the same documentation rules as vehicles. I'm telling clients that if they are deducting their cell phone expenses, they should have a log of their business and personal calls and only deduct the % business use and if they don't, be prepared to give up all the writeoffs on any audit. | |
| September 21, 2007 | |
| D&T - the base cost of the business line is more expensive than a residential line, at least here in Hawaii. So there is no way to separate that part out. As far as adding another line goes, it's an option but may not be worth it.
Wayne, how many cell phones have you seen capitalized in the past few years? When they first came out, they were expensive. Now they're given away as promotions. As far as a log, in all practicality I probably wouldn't keep one. (I don't own a cell phone, however.) It was easier when cell phone companies made the log part of their invoices. I do agree with you that having a log is best. But as I said, I'm sure there are plenty of people out there writing off the whole expense, and most of them won't be audited. | |
| 21 September 2007 | |
| Very true - I'm just pointing out what the IRS position will most likely be based on current laws. | |
