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Discussion:Vehicle not owned by S Corp

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Discussion Forum Index --> Consumer Questions --> Vehicle not owned by S Corp (talk|edits) said:

15 November 2005
S Corp uses a specialty work truck that was purchased by the company's president "J". He is the majority shareholder. Truck is used 100% for business. At the time of purchase, the business was just starting out, so J made the loan under her personal name, and also titled and registered the vehicle under her name instead of the company's. For the company to properly claim the related vehicle expenses, what kind of documentation should the company have?

The company would like to eventually have the vehicle registered under the business. What are the pros and cons of having the OWNERSHIP TITLE under J's name but the vehicle registration under the company name? She would like to have both the title and registration under the business name, but the concern is "transferring" the loan, i.e., need to make a "new" loan.

Cpasupport (talk|edits) said:

16 November 2005
Perhaps code section 351 transferring assets to a"just starting out" S corp will work. If you have a Schedule C with assets such as a vehicle that then incorporates I belive Code Section 351 allows you to transfer those assets/depreciation balances to the corporation. Obviously title is not always able to be transferred if there are debts, so I think you can go ahead and write-off the vehicle on the corporate tax return under possibly an extended doctrine of code section 351 even if the truck is not in the corporate name.
    • Tell the client to ask their insurance agent a question or two. If the truck is in the business name do I have to carry a commercial policy (Usually bigger $$$)? If the truck is in the personal name am I covered with a personal policy am I covered if I have an accident while on the job?

Jsanchez (talk|edits) said:

17 November 2005
I believe Cpasupport is right! Also make sure you properly document the corporation with minutes and resolutions.

KRRCPA (talk|edits) said:

14 June 2008
Since title hasn't transferred, you haven't legally contributed the Sch C asset to the S corp, and if there is a loan, the legal liability for repayment remains with the borrower, i.e. the individual. Another solution is to have the S Corp lease the vehicle from the owner. Prepare a simple auto lease, outlining what expenses the company will be paying on the vehicle (perhaps all), including a reasonable monthly lease payment. The owner then reports the lease income, and related depreciation and/or interest expense on a Schedule C, business type is auto leasing (non-passive). If he/she is 100% owner of the S corp, the Sch E lease expense and Sch C income, net of depreciation/interest expense will offset one another, although they will not necessarily net to zero (timing differences).

RoyDaleOne (talk|edits) said:

14 June 2008 your question and discussion asks too many questions and mixes the facts between entities. he, she, "J", majority sharekholder, S Corp, 100% business for whom, pros and cons, I suggest some education or a good book on the subject matter.

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