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Old 07-22-2015, 09:22 AM   #1
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Question: IRS Tax deduction for Motor home & Toad

Okay, here's my question. My wife and I make high end metal sculpture and travel to Art Shows all over the place. I know I can take a mileage deduction for my motor home in the amount of $0.575 per mile (or actual costs incurred, whichever is greater). That is the 2014 rate, the 2015 rate has yet to be determined.

The question I have is that I am towing a 2004 Honda Element (4 wheels on the ground). The Toad is packed with our show canopy, display walls, pedestals, some of our artwork, and other show essentials. It isn't actually being DRIVEN when attached to our MH, rather TOWED, but it is still incurring wear and tear on the tires, suspension, potential rock chips, etc. The odometer is not turning over while towed, but the distance towed is identical to the mileage incurred on the motor home, so figuring the exact mileage towed is not a problem.

Obviously, I can deduct the in and around mileage registering on the odometer when at shows, delivering pieces, etc, but are there any accountants out there who can weigh in on whether I can deduct the actual mileage while being towed? And if so, would it be at the same rate ($0.575 per mile)?

I have researched the IRS website including Topic 510, but it only uses the term "business use", it never states "miles DRIVEN" or similar terms. If it's a legal deduction, I will use it, knowing that I need to document the mileage and business usage. If it is NOT a legal deduction, I will NOT use it. I just can't find out definitely whether it is or not. I called an IRS hotline, and the response I got was. "It sounds like it is a legitimate deduction, but you really need to check with a tax accountant." . . . . Yes, that was from the "Horses Mouth", the IRS, whom I assumed knew their own regulations . . . . the answer sounded more like it came from the OTHER end of the horse!

Any assistance (with specific references if possible) would be appreciated!
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Old 07-22-2015, 09:30 AM   #2
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Quote:
Originally Posted by Hit_the_Rhod View Post
Okay, here's my question. My wife and I make high end metal sculpture and travel to Art Shows all over the place. I know I can take a mileage deduction for my motor home in the amount of $0.575 per mile (or actual costs incurred, whichever is greater). That is the 2014 rate, the 2015 rate has yet to be determined.
The question I have is that I am towing a 2004 Honda Element (4 wheels on the ground). The Toad is packed with our show canopy, display walls, pedestals, some of our artwork, and other show essentials. It isn't actually being DRIVEN when attached to our MH, rather TOWED, but it is still incurring wear and tear on the tires, suspension, potential rock chips, etc. The odometer is not turning over while towed, but the distance towed is identical to the mileage incurred on the motor home, so figuring the exact mileage towed is not a problem.
Obviously, I can deduct the in and around mileage registering on the odometer when at shows, delivering pieces, etc, but are there any accountants out there who can weigh in on whether I can deduct the actual mileage while being towed? And if so, would it be at the same rate ($0.575 per mile)?
I have researched the IRS website including Topic 510, but it only uses the term "business use", it never states "miles DRIVEN" or similar terms. If it's a legal deduction, I will use it, knowing that I need to document the mileage and business usage. If it is NOT a legal deduction, I will NOT use it. I just can't find out definitely whether it is or not. I called an IRS hotline, and the response I got was. "It sounds like it is a legitimate deduction, but you really need to check with a tax accountant." . . . . Yes, that was from the "Horses Mouth", the IRS, whom I assumed knew their own regulations . . . . the answer sounded more like it came from the OTHER end of the horse!
Any assistance (with specific references if possible) would be appreciated!
Hit_the_Rhod
See the above, (highlighted in red).
Mel
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Old 07-22-2015, 09:53 AM   #3
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(the answer sounded more like it came from the OTHER end of the horse!) LMAO....

I had a issue as where I could only claim the vehicle as a straight or standard business expense, meaning it was used only for business and all miles (driving) were deductible.

This sounds like the same that would apply to your situation.

I am not a tax expert nor advisor, just my experience from a time long ago. The codes change every year and I no longer have time to keep up with them.

The answer you got leads me to believe the IRS has no time to keep up either.
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Old 07-22-2015, 12:06 PM   #4
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Per Mel's advice, as well as the representative of the IRS, I consulted with a tax accountant over the phone. His definitive statement based on 30 + years of experience in the tax business was "I've never been asked that question before, but I think it is a legitimate deduction, and could probably successfully argue it to the IRS in the event of an audit. . . ." So there you have folks, the final answer, he would try it, but I will the the one on the hook in an audit!

Silly me, I thought that the IRS would have an answer to the regulations that they enforce!

Oh, just for info to those of you out there that are looking at a Motorhome as a deduction, check out the article (see link below) from the Bradford Tax Institute.
Still doesn't answer my original question re/ the mileage on the toad while BEING towed, but interesting non the less.


Tax Reduction Letter - How to Deduct Your Business Motor Home

Frustrated in Kentucky!
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Old 07-22-2015, 01:53 PM   #5
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If it was a trailer and used in your business, the answer would be straight-forward, but trying to claim the toad as a part time trailer probably raises more questions than the value of the deduction is worth. Since [I think] the primary purpose of towing the car is to have transport at the destination, it may be hard to justify what additional wear & tear resulted from transporting business goods in it. I don't think you could justify all the costs involved with towing, but maybe a clever accountant could figure a way to pro rate some of it.
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Old 07-22-2015, 02:02 PM   #6
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Clever accountant = tax audit.
I think your toad isn't deductable above the actual miles driven for business as the accountant stated.
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Old 07-22-2015, 03:58 PM   #7
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As a CPA who has been practicing for 35 years and one who teaches taxation to other CPA's I would disagree with the assumption that you could take the miles towed for your towed vehicle. In the event of an audit you have to be able to prove the business miles driven by the vehicle used in the business. Besides a contemporaneous mileage log you would also have to provide copies of oil change receipts, inspection receipts, and anything else that would provide an independent collaboration of the miles driven. I agree that you have an argument, but winning that argument might be more of an issue.

My suggestion would be to use the miles driven with the motorhome at the standard rate ($.575 in 2015) and then the miles on the toad for business. I think you would be hard pressed to win on both vehicles for the same mileage.

To add to the issue we are finding the IRS to be much more aggressive over the last several years. Quite often we are finding them to be taking an attitude of here's your bill and it will cost you more to take it to Appeals than it would to just pay the tax. Sad, but that's life in the taxation realm these days.
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Old 07-22-2015, 04:13 PM   #8
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Originally Posted by Hit_the_Rhod View Post
........Silly me, I thought that the IRS would have an answer to the regulations that they enforce........!

LOL. Are you really that naive? ;-)
There is nobody in the country who understands the Internal Revenue Code. I would hazard a guess that there are a half million extra, non-essential people in the U.S. kept employed solely by the unwarranted complexity of the IRS Code.
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Old 07-22-2015, 08:32 PM   #9
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To Wnytaxman, That is kind of where I am right now, and why I was asking for any definitive information. We just purchase the motor home this year, before we were using a pickup towing a travel trailer, so the issue didn't come up. The Motorhome mileage as well as the campground fees while we are enroute or at shows are no brainers, as are the in and around mileage for the motor pickup, and now for the toad, I was trying to find out if anyone knew FOR SURE yes or no on the towed mileage. So far, IRS customer service yes (which I know really means nothing when it comes to an audit). Tax Accountant, probably yes, but unless I can get steered to something definitive like the results of a court case where my situation is addressed, I probably won't claim it. Thanks to all the people who chimed in though! Take care,
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Old 07-22-2015, 08:33 PM   #10
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LOL. Are you really that naive? ;-)
There is nobody in the country who understands the Internal Revenue Code. I would hazard a guess that there are a half million extra, non-essential people in the U.S. kept employed solely by the unwarranted complexity of the IRS Code.
I once asked my tax firm about the chances of switching from our IRS system to a flat 10% of gross earnings-for everyone. After she stopped laughing I bowed and left.
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Old 07-22-2015, 08:42 PM   #11
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I think there would/could be some deduction for wear and tear, but the .57 cents per mile on the motor home includes fuel......a big factor in the equation. Second, you would have no way to prove mileage that wasn't being recorded while your towing. I would think it would be tough to prove, even though it makes sense, that the toad traveled the same distance as the coach, without odometer readings as proof.
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Old 07-22-2015, 08:59 PM   #12
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I consulted with a tax accountant over the phone. His definitive statement based on 30 + years of experience in the tax business was "I've never been asked that question before, but I think it is a legitimate deduction, and could probably successfully argue it to the IRS in the event of an audit. . . ." So there you have folks, the final answer, he would try it, but I will the the one on the hook in an audit!
I think you need to a better informed person.

"30+ years experience......I think it is a legitimate deduction......could probably successfully argue it to the IRS".
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Old 07-23-2015, 07:27 AM   #13
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I think you need to a better informed person.

"30+ years experience......I think it is a legitimate deduction......could probably successfully argue it to the IRS".
Successfully arguing and winning are two very different things. What I tell clients is that every tax deduction comes down to what I call DOA. No, that's not dead on arrival but Depends on the Auditor. You can have one auditor have a fit over a deduction that is completely and totally legal while another auditor will not even blink or remotely question the deduction. Tax law, like all laws is subject to interpretation. One auditor will interpret something one way and another auditor will go the exact opposite way. Yes, you may have a legitimate argument but if the auditor says NO, then you have to consider the cost and time involved in an appeal.

I've got one case right now where the client is right but the auditor is bouncing the deduction. It will cost him more to take it to Appeals than it will to just pay the tax. Even being correct and taking it to Appeals is no guarantee that you will win.
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Old 07-23-2015, 09:28 AM   #14
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Realistically, what is the wear & tear on a vehicle under tow? Some tire wear, some brake wear, and maybe a bit of wear on the wheel hubs? Prorated over a very long life? And then prorated again because even the time under tow is not exclusively for business hauling. I doubt if you could come up with more than a few pennies per towed mile. And every bit of it highly debatable to begin with...
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