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Discussion:Your opinion on deduction of 100% business use of car

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Discussion Forum Index --> Basic Tax Questions --> Your opinion on deduction of 100% business use of car


Discussion Forum Index --> Tax Questions --> Your opinion on deduction of 100% business use of car

Lalva (talk|edits) said:

2 February 2012
Hello Almanacers,

I am pretty sure I'll be scolded for asking this question, but I have used the yellow box, and read for a while and still I haven't found the answer to my question.

I would like to know if any of you have any experience with the IRS questioning 100% business deduction of a car or truck. I have a client (self-employed) that told me she is going to use her pick up truck 100% for business purposes so she doesn't have to keep a mileage log. She is married and they have another car (that her husband use).

This is my first client wanting to expense the car 100% for business and I am afraid that this could be a red flag for an audit. It may be that she is too lazy and doesn't want to keep the log. How do we prove that the truck is 100% in an audit if she is not going to be keeping track of the miles? I already told her that standard mile deduction may be more beneficial to her anyway.

Your comments are greatly appreciated.

Marcilio (talk|edits) said:

2 February 2012
My opinion, there's no such thing as 100% business use for listed property. I would have concerns about a client who refuses to be disciplined enough to follow simple rules.

Ddoshan (talk|edits) said:

2 February 2012
Pickup truck .. kind of agree with Marcillo. Curious what kind of business she is in. Also even if taking actual expense doesn't one still need to keep some record of mileage. Are all the miles she drives and considers business miles actually business miles. No commuting to sites, jobs, or clients.

MilTaxEA (talk|edits) said:

2 February 2012
I wouldn't have a problem if they claimed 100% business usage, but they better have an iron-clad log and documentation to back it up. She would also need to show me that she has another vehicle used for all non-business purposes. I would need to be comfortable that the mileage was not commuting or personal.

There is a reason listed property has strict documentation requirements. An auditor would be completely justified denying most of the business mileage for her truck if she could not substantiate it.

CathysTaxes (talk|edits) said:

2 February 2012
I think it depends on what the client's business is and how the vehicle is setup. If a pickup truck is loaded with tools, is painted with the business name, and is way too dirty for a respectable wife or girl friend (or their children) to ride in, then I wouldn't be too afraid to claim it for 100% business. Also, if I see gas receipts that are out of state, then I book them to the owner's draw account.

Taxea (talk|edits) said:

2 February 2012
I would discourage it because vehicles are so iffy. It could get totalled tomorrow and she would have to pay the IRS back for the depreciation not qualifying. Also if she doesn't keep a mileage log how are you going to determine whether she actually uses it 100% for business? Wouldn't fly with me.

CathysTaxes (talk|edits) said:

2 February 2012
Depreciation recapture is a royal pain. A tax client (I didn't keep his books), who for several years, was a self employed carpenter, buys a pickup truck that he sets up for his work (also has a personal auto). It met the rules for special depreciation. I tell client when we took the depreciation, that he has to remain self employed and use the truck 100% for business. Two years later, he takes a full time carpentry job and his business use dropped to 2%.

Lalva (talk|edits) said:

2 February 2012
She is a photographer and has a home office. She is normally hired for weddings and things like that, so there is a lot of driving involved.

Yes, I am not comfortable with the 100%, and I think it will draw a lot of attention from the IRS. I'll have to talk to her about the substantiation requirements.

Thank you for your comments.

Death&Taxes (talk|edits) said:

2 February 2012
"Impetuous, Homeric"

Last time I looked, most weddings were held Friday-Saturday-Sunday. Perhaps she goes back to her cave for the other days of the week?

If she insists on her interpretation of the Code and Regs, insist that she keep an appointment book where at least she has a starting point.

Szptax (talk|edits) said:

2 February 2012
In theory, I don't have a problem with 100% business use if the use is 100% business use. There is another vehicle for personal driving. The situation gets murky when the self employed client is out and about running personal and business errands. Maybe they are picking up photography supplies, or meeting a client at a venue to prepare for the photography session and it happens to be near the grocery store and the mall and they do their grocery shopping and return those shoes they've been meaning to return. Not so clear anymore.

You are using actual expenses. What do you consider the mileage to the garage? Business or personal. If 100 percent business use, I say business but... if there is a mileage allocation to personal...

MWPXYZ (talk|edits) said:

2 February 2012
This probably does not apply to a pickup being used by a photographer; but, most full size pickups are not listed property, and a log would not be necessary.

Szptax (talk|edits) said:

2 February 2012
Why would most pick-ups not be listed property?

RBruce (talk|edits) said:

2 February 2012
I don't know about it not being listed property unless it is used only by employees who are less than 5% owners, left locked at the shop at night, and has a written policy against personal use, including commuting. I also don't know how the discriminant function rates 100% vehicle use. But I'd suspect that 100% use of a nice vehicle without unrelated employees, is going to draw attention. So you'd better keep logs anyway, in order to salvage something if you can't make your case.

JR1 (talk|edits) said:

February 2, 2012
Three situations I can think of: Realtors I will fight for 100% since they cannot drive and not be looking at and thinking about real estate if they're really in it. Vehicles that are left at the shop/office. And those where there is an office in the home, other cars are available, and they can document the use and it seems to ring true. So not that unusual.

Death&Taxes (talk|edits) said:

2 February 2012
But she doesn't want to document the use of it: "she is going to use her pick up truck 100% for business purposes so she doesn't have to keep a mileage log." Or in the words of an expression we use, 'she thinks her >>>> doesn't smell.' So when you visit and she has to run and pick up a prescription, she then says, "well, what about the miles on Brad's Honda that I don't deduct."

Ddoshan (talk|edits) said:

2 February 2012
Concur with Szptax... truck would be listed property.

RBruce (talk|edits) said:

2 February 2012
I've seen where the taxpayer has a beautiful new truck and a beaten up old one with the company name painted on the side that is claimed to be 100% for business and had no questions. Besides, in a real going concern there are invoices and calendars and oil changes with the mileage on them so you could re-construct much of the mileage if you had to, and if they used it to go to the grocery store occasionally, the chances are that they used the personal one for business occasionally too.

Anyway, if you've advised her of what documents she will be required to produce, and the consequences if denied, and issued the appropriate disclaimer, and she still swears it is 100% it is her lookout, You are preparing, not auditing her return.

Taxea (talk|edits) said:

3 February 2012
I would tell her that if she doesn't want to document the usage you can't put it on the return because I have a license to protect and what she is asking to do has no documentation for "due diligence" purposes. Yep, I'm using that term again.

Marcilio (talk|edits) said:

3 February 2012
All of us probably have clients like this. It sounds like she is an artist type who resists organization and details. My favorite tactic is to explain that I wouldn't know how to set up a photograph with proper lighting, focus, lens settings, etc. That's her business and I'm sure she does it well. Taxes are what I do, and I wouldn't expect her to know the laws and regulations - that's my business.

If I wanted to wanted her to take pictures, I know that she would use techniques and an artist's eye for getting the desired result. Similarly, if she wants the security of knowing her taxes are done properly, she needs to trust my understanding of the law and my judgment for handling her unique situation.

DaveFogel (talk|edits) said:

3 February 2012
"She is a photographer and has a home office."

Better show her the case of Bogue v. Commissioner, T.C. Memo. 2011-164, where a self-employed contractor tried to deduct his transportation expenses between his home and the various job sites where he worked on the grounds that his home office was his principal place of business. The Tax Court ruled that the mileage was commuting. It's an extensive, well-written opinion.

MWPXYZ (talk|edits) said:

3 February 2012
Sorry - re pickup: I had my mind on depreciation limits on passenger cars rather than recordkeeping requirements.

Ddoshan (talk|edits) said:

3 February 2012
I touched on that in another post. I believe they ruled against him and his home office as his principal place of business because he could not pass or meet the exclusive use test of his home office. Otherwise he most likely would have been ok.

WEISSEA (talk|edits) said:

3 February 2012
"I would like to know if any of you have any experience with the IRS questioning 100% business deduction of a car or truck."

Yes, I had a client with a MATCO Tools truck (Matco sign on the side) and I took 100% business use and IRS Schedule C auditor said he agreed it's obvious no one would be using a large tool truck for personal use.

So if you would drive the pickup to a personal event and not be embarassed and want to take 100% then client had better have the world's greatest auto log.

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