Vehicle Titled in S Corp Shareholder Name

[David]

Client purchased a new truck in his name and has it capitalized in his S Corps books. His previous tax preparer allowed his previous vehicles to be depreciated and actual expenses deducted in the S Corp books even though the vehicles were titled in the single shareholder's name. The SH owner's personal use was included as W-2 income.

So, in the past, the SH owner's vehicles titled in his name has been allowed to be treated as a company vehicle on his 1120S.

It seems as though this treatment is common. I am trying to convince the client that he can't treat the vehicle as a company vehicle unless it is titled in the S Corp's name.

Am I the only one that seems to think this is a problem or do most of you not allow clients to do this?

Thanks.

 

[Medlin Software, Dennis]

I cannot answer on the proper way.  I can suggest "motivation" as there is likely a big cost difference when insuring a vehicle in a company name, and possibly in the financing and registration as well.

[Lee B]

I have run into this same problem with S Corporation clients several times in recent years.

With my clients the problem arose because of a lazy salesperson who didn't want to do the extra paperwork told my clients they didn't need to register the vehicle in the corporate name.  My firm policy is to make the client go back and have the paperwork redone correctly, which they have done.

[Abby Normal]

40 minutes ago, David said:

Am I the only one that seems to think this is a problem or do most of you not allow clients to do this?

We don't allow it. When they do it and refuse to get it fixed, we remove the asset from the books and tax return, treat all loan payments and vehicle expenses as distributions and do a journal entry at year end for business mileage at the standard rate with a credit to additional paid in capital. The client loses the deduction for interest on the truck, since it's a personal vehicle, but doesn't have to add anything to their W2.

[WITAXLADY]

I have them bill miles used from personal to business every month...

as usually using mileage

Business vehicles are usually titled in business thank goodness - ie work vans etc...

[Lee B]

26 minutes ago, WITAXLADY said:

I have them bill miles used from personal to business every month...

as usually using mileage

Business vehicles are usually titled in business thank goodness - ie work vans etc...

And I'm sure your clients like mine keep contemporaneous and accurate mileage records 

[Abby Normal]

I add a question to the organizer every year asking if they kept a mileage log for all business or rental miles.

[David]

Thanks, guys. You've confirmed that I'm not to unreasonable in these situations.

[WITAXLADY]

well - I do hand out small calendars for that purpose with a clip pen attached for those that do not use apps

and I stress when you get in write down the odometer and where you are going!!

Get more every year!!!

I am amazed!

And I stopped ordering the fancy leather calendars as I could not even get rid of 10% to clients  - don't use!

As I don't either...