Auto lease to related party

Technical topics regarding tax preparation.
#21
JR1  
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Pretty much everything is, which is why most of us won't touch one of these. Sorry, had to.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
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#22
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I don't understand how the S Corp could lease the vehicle for the owner to drive, if the owner is not an employee. Wouldn't all of the use be personal use? If it would be business, that would mean the owner is working in the business and should be getting a salary, correct?
 

#23
dsocpa  
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JR1 unfortunately I'm left with the situation and must deal the best I can. Just looking for thoughts on how to handle the situation as is. The owner of the S corp provides services to the corp through the C corp. He is performing consulting for the S corp and is paid. My understanding is this is acceptable as a "common paymaster" He is getting a salary bottom line it goes from one pot to the other.

From those I've consulted this isn't that unusual even now for liability purposes. However, many have told me their clients just have the vehicle in their name and have their company pay them a "lease" payment monthly. No written docs, no reporting on a schedule C. In this situation the client is preparing a legal document, has titled the vehicle in name of the LLC and will report all income. Again going from one place to another with all accounted for and will be subject to SE tax as well. While I understand this might not be the ideal arrangement or you might not agree with the way the transaction is structured I believe I am clear on that point...
 

#24
JR1  
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I think you've got it about as right as you can. Just make darned sure that NO personal use is involved...even if you account for it, it's prohibited! So that's the kiss of death on audit....
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
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#25
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Good evening !

The S corp does not have an accountable plan to which the 100% S corp shareholder can ask for reimbursement. As an alternative can the Shareholder lease his personally owned car to the S Corp and report the loss on Schedule E. Presently he p rents the building which the S Corp occupies at a profit. I am thinking I would like to take the bonus depreciation on the shareholders new car purchase. I could offset the profit from with building rental with the loss from the car rental.

What do you think?

Thanks,

Art
 

#26
dsocpa  
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Art, putting an accountable plan in place is not difficult. I have clients with multiple entities that lease to equipment, autos, etc. between entities which is very effective to accomplish what they need to do. Leasing between employee and corp. might not be the best idea. I’m thinking he needs to set-up a wholly owned LLC and file a schedule C for the leasing. The Corp would need to issue a 1099 at year end. As you can see the accountable plan is much easier especially if he only has 1 entity.
 

#27
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Thank you DSOcpa. Can depreciation on the car be part of the reimbursed expenses under the accountable plan. I want to take the bonus depreciation this year on the new car

Thanks,

Art
 

#28
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I am thinking because of the requirement that an accountable plan must have the expenses timely substantiated, it is easier to simply rent the auto to the S Corp. The rental does not require timely substantiation. Further I can take bonus depreciation on the car on the Shareholder's schedule E, and I am not sure that an accountable plan allows for bonus depreciation.

Stay warm !!

Art
 

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