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3 Replies Latest reply: Oct 15, 2009 10:39 AM by bm911tax RSS

100% Shareholder/employee Lease personal vehicle to S corp

Jose263 Newbie
Currently Being Moderated
President, shareholder, and only employee of S corp 2nd year in business. Did well this year. seeking tax strategy
Considering replacing current vehicle with new vehicle before end of year 12/31/2009 - mixed personal and business use but would be >50% business use. probably near 100% during remainder of 2009.
Prefer the Scorp NOT purhase/own the vehicle
Scenario:
If I personally purchase new SUV >6k lbs and lease it to my S corp. Does this qualify for the sec 179 deduction on personal 1040? If so, what % for 179?

Use of the vehicle would be primarily in the S corp business >50%. I think would have to report Personal use miles value as income on W-2?
how would lease payment from S corp to shareholder be handled - thinking of leasing for the monthly payment amount - i.e Scorp pays car note

Welcome advice/comments
  • Re: 100% Shareholder/employee Lease personal vehicle to S corp
    bm911tax Apprentice
    Currently Being Moderated

    In order for employees to get reimbursed by the S Corp for ordinary and necessary business expenses, the S Corp needs to adapt an Accountable Employee Reimbursement Plan. See link for more details http://www.irs.gov/irb/2006-46_IRB/ar08.html

     


    Be careful with the mileage (many people abuse it). Without proper record keeping for auto business use, IRS will disallow these type arrangements.

     

    Yes, you can use appropriate % of 179 for auto deduction if you use it over 50% for business. But in your proposed scenario, (the vehicle will be purchased by individual) and S Corp will only be reimbursing you for business use, so no 179 will be available for S Corp.
    • Re: 100% Shareholder/employee Lease personal vehicle to S corp
      Jose263 Newbie
      Currently Being Moderated
      BM - thanks for response

      "Yes, you can use appropriate % of 179 for auto deduction if you use it over 50% for business. But in your proposed scenario, (the vehicle will be purchased by individual) and S Corp will only be reimbursing you for business use, so no 179 will be available for S Corp".

      In proposed scenario - can individual owner (also S corp employee) take 179 if leasing the vehicle to S Corp?

      Perhaps the best way to ask my question is:
      Single shareholder/owner S Corp also single employee - a vehicle is needed to be used in the business >50% for business purposes.
      What scenario(s) would allow 179 deducion for purchasing new vehicle and placing in service in 2009?

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