Deduction for $150,000 "Hot Rod"

Technical topics regarding tax preparation.
#1
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Client has a custom auto parts business earning 3M in gross sales and about $600,000 in net profit.

I see around me that all of the custom shops have monster trucks and similarly valuable collectables, etc. They are in their showrooms and they go to all of the car events - promoting their brands.

The client insists that it is 100% business use and the family has two other cars for everyday personal use (well, actually, he has a truck that is partial business use, with logs, etc).

Sounds OK, I guess, but I can't help but suspect that there is an element of personal/recreation going on here and I just wanted some experienced opinions.

Do you take 100% business-use for the hot rod?
 

#2
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Closest I ever had to this was a contractor who bought a classic car to take to car shows because he networked with many of his clients and established many new leads at these shows. He had it well documented the amount of new business he generated by attending these shows. Still wasn't comfortable taking the vehicle as an expense. I showed it on the balance sheet with no depreciation, although, we did write off operating and maintenance expenses. He ended up selling it a few years later for about what he paid for it.
Alternatively, I had another contractor who started up a racing business with similar direct connections between the racing activity and business development. Took all those expenses, but in a separate entity. There was a case a couple years ago with very similar facts that was sustained for the taxpayer.
Probably depends on how aggressive the client wants to be.
~Captcook
 

#3
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Thread reminds me of the recent case Avery v. Commissioner (T.C. Memo. 2023-18). Attorney was trying to deduct his amateur race car and related expenses as advertising for his law practice.
 

#4
sjrcpa  
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My attorney client who wanted to do exactly that was not named Avery. I told him no deduction.
 


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