Entertainment use of ATV/Dune Buggy

[perkie]

I have a client who early last year told me he purchased a car/SUV for his business.

And now I find after asking him about mileage & GVW for the thing it turns out to be a dune buggy/atv that he uses to entertain clients with on trips taken expressly to ride the thing, he pays a yearly fee for a special use permit to camp out and ride on the sand dunes.

It has been used about 80% for business clients and the rest personal use.

any one have any thoughts on this and how to treat it?

[jainen]

>>a dune buggy/atv that he uses to entertain clients<<

His dune buggy is not deductible, period. Although costs of an entertainment ACTIVITY can be allowed (subject to strict substantiation of business purpose), Section 274(a)(1)B prohibits a deduction for entertainment PROPERTY such as a yacht, lodge, car, airplane, or apartment. That includes operating expenses as well as depreciation. So if he can document that the entertainment was directly related to or associated with the active conduct of business, and that the entertainment was not lavish or extravagant for the purpose, 80% of his permit might be 50% deductible. But the big toy, no.