TRUCK PURCHASE MESS

[Lee B]

Regular Corporation client buys brand new Chev Silverado 3500 for $ 69,000.

Truck salesman tells my client that they don 't need to do extra paperwork  to title truck and loan paperwork in Corporate Name.

All the purchase and loan paperwork ends up in my clients personal name. This isn't the first time this has happened to one of my clients.

I tell my client he has to go back and have the purchase and loan paperwork redone in the name of the Corporation, which I have had other clients do in the past.

My client is dragging his feet and doesn't want to have the paperwork redone.

I can't think of any alternatives to having the purchase and loan paperwork all redone ?

[Pacun]

Rent the car to the corporation. charge just the depreciation amount and that should 0 the personal return. Is what am I saying legal? I believe it is the same principal as renting a building from your one-member LLC to your C Corporation.

 

[Lee B]

3 minutes ago, Pacun said:

Rent the car to the corporation. charge just the depreciation amount and that should 0 the personal return. Is what am I saying legal? I believe it is the same principal as renting a building from your one-member LLC to your C Corporation.

 

If this is a viable workaround, the loan interest would also have be included.

[Edsel]

A good plan.  Can rent the vehicle for a little more and show a profit - and it will wash so long as the client is a 100% shareholder.

Problem is, if this guy is not going to be bothered enough to change the title, will he be bothered enough to prepare a lease?  Or what about an accountable plan for mileage reimbursement?

Might be a good idea to give this guy an estimate of how much more in taxes he will have to pay if he's not going to do anything.

[schirallicpa]

And then late file a 1099 for the rent?

I had one of these problems last year.  

[Max W]

Sales people can be dishonest.  It is not in their interest to prepare license and insurance papers for a corporate customer.  Both of these would add to a higher price tag on the vehicle and could kill the sale.  Many sales have died because of small things.  With a nice commission hanging in the balance, the salesman doesn't want to see the customer walk.

[jklcpa]

Agree with Max, and it could also be that he wouldn't get the best deal as a corporate customer, whether because of price or because of the interest rate on the loan.

Aside from the tax implications, if your client is going to lease to the company, make sure that lease is formalized and includes a clause releasing him from personal responsibility in the event of accidents.  He doesn't want to place his personal assets at risk because the vehicle is still titled in his personal name.

[Lion EA]

Will it really be 100% biz usage? If not, and corporation owns truck, corp has to add personal use to W-2. Sounds like your client wouldn't be bothered with that, either. How about an accountable expense plan for biz mileage reimbursement?

[Abby Normal]

Have the shareholder submit mileage reports and get paid the standard rate. Deduction for corporation and no income for shareholder.

The ones I had like this that paid all the vehicle expenses and loan payments in the corporation, would put all those payments into vehicle expenses, then when they'd do a mileage report, they'd subtract all the expenses paid and just pay the shareholder the difference.

[Lee B]

49 minutes ago, Abby Normal said:

Have the shareholder submit mileage reports and get paid the standard rate. Deduction for corporation and no income for shareholder.

The ones I had like this that paid all the vehicle expenses and loan payments in the corporation, would put all those payments into vehicle expenses, then when they'd do a mileage report, they'd subtract all the expenses paid and just pay the shareholder the difference.

The problem is this is a semi-retired Corporate President, who doesn't come to work every day and when he does it's just for an hour or two.

In addition the driver of the truck is his son who is the shop manager.

[Lee B]

Problem Resolved:

My client finally went back to the Credit Union who had issued the personal loan for the truck.

The Credit Union made a business loan to the Corporation which paid off the personal loan.

Then my client transferred the title from himself to the Corporation.

Big Sigh - I was really not looking forward to dealing with this mess !

[Lion EA]

Wow. How about gift to son? You get paid for a gift tax return. Then, maybe, you can get the son to work with you. Give to corporation in exchange for some stock? Right now you have son/employee borrowing dad's truck to drive on corporation business. I don't think anybody/entity gets any deductions.

[Lion EA]

Oops, I wasn't watching replies! So glad your client helped simply the situation.