S-Corp sole shareholder "reimbursements"

[SunTaxMan]

Situation. S-Corp sole shareholder owns vehicle (window van) and uses for 100% business. Fuel and washing paid for by S-Corp. Depreciated on personal return.

Question - how to handle the rest:

1. "Accountable plan" for monthly payments, insurance, repairs, registration, etc., reported by shareholder to S-Corp and reimbursement check inssued via "Petty Cash" - not in Payroll. Shareholder reports on 2106.

2. Eliminate the "Accountable Plan" and Shareholder report "reimbursement" and expenses, personally paid, on Schedule C, with 1099-Misc as documentation.

I am thinking #2 is prefereable (1) to avoid Schedule A use, because taxpayer does not itemize, and (2) this "covers" the variance between the "loan" payment and depreciation.

Question - does this NEED to show on K-1, rather than 1099, because more-than-2% Shareholder?

Thanks,

[jainen]

>>I am thinking #2 is prefereable (1) to avoid Schedule A use, because taxpayer does not itemize<<

I don't follow this thinking at all. He is obviously not self-employed, so how can he file Schedule C? If he claims unreimbursed employee expenses (including depreciation), he claims them on Schedule A. His status as an employee is set by the definition of a corporate officer, not because he is a shareholder. He must take a reasonable salary for the work he performs, and expenses incurred in that work are employee expenses.

Go with #1. But don't deduct "monthly payments" except interest, since you are already deducting depreciation.

[kcjenkins]

#3 Sell the van, at FMV, to the corp, and let the corp pay the expenses and deduct them.

[TAXBILLY]

Agree with KC. Keep it simple.

taxbilly