Section 179

[molliandjeff]

Good afternoon,

Has anyone on here used section 179 with their coah purchase? For those that have......

1. Did you put the coach in the business name or personal?

2. If you put a coach in business name is your insurance for the coach more expensive?

3. Any other items that I should consider for section 179 depreciation expense for business use?

Thanks in advance

[wnytaxman]

Originally Posted by molliandjeff

Good afternoon,

Has anyone on here used section 179 with their coah purchase? For those that have......

1. Did you put the coach in the business name or personal?

2. If you put a coach in business name is your insurance for the coach more expensive?

3. Any other items that I should consider for section 179 depreciation expense for business use?

Thanks in advance

To use Section 179 on a coach purchase is something that requires a great deal of thought and planning. First off, can it be done? Yes, it can but there would have to be some very compelling arguments put forth that it is "necessary and ordinary" for your particular situation. In other words you will need to build a pretty strong case that your use of the coach in your business was necessary.

To answer your questions specifically, the titling of the coach will depend on what your business entity is. Are you a sole proprietor, single member LLC, or are you a corporation, either S or C? If you are sole proprietor then there would be no need to use your DBA for titling. As a corporation you would need to title the rig in the corporation name and yes it will more than likely have a very adverse hit on your insurance costs.

What would make your need for the coach in your business as opposed to other means of transportation or accommodations? Do you plan on any personal use of the rig? Under what part of the tax code to you intend to use to justify your use of the rig in your business? Remember, if you have personal use of the rig then you have to proportion the business and personal use. If your personal use exceeds 50% then you can't section 179 the business portion.

Bottom line would be what's going to be your reason for the coach in your business? The two most recent cases of which I am familiar knocked out the deduction for the coach, so be aware that you may be standing downwind when the fertilizer hits the ventilator, to paraphrase the old expression.

[molliandjeff]

thanks WNYtaxman,


From a tax standpoint, I have in my business plan the absolute need for a coach and a very accurate and detailed logging of personal/business use to confirm the percentage of use for the percentage of deduction.


The business is an LLC with electing tax filing of S-corp. Since the tax filing is S, I believe I will be able to buy in my personal name. I have this question in to my CPA but i figured I would reach out to someone that has done it as well.


I don't mind putting in business name, but if not required, I wourd rather not give the insurance company more $$$ for the same coverage. If someone knows the difference in insurance premiums business vs personal, that would be appreciated as well. In general percentages woudl be fine.


Thanks so much.

[wnytaxman]

Originally Posted by molliandjeff

thanks WNYtaxman,


From a tax standpoint, I have in my business plan the absolute need for a coach and a very accurate and detailed logging of personal/business use to confirm the percentage of use for the percentage of deduction.


The business is an LLC with electing tax filing of S-corp. Since the tax filing is S, I believe I will be able to buy in my personal name. I have this question in to my CPA but i figured I would reach out to someone that has done it as well.


I don't mind putting in business name, but if not required, I wourd rather not give the insurance company more $$$ for the same coverage. If someone knows the difference in insurance premiums business vs personal, that would be appreciated as well. In general percentages woudl be fine.


Thanks so much.

It isn't enough to just simply put it into your business plan that you have an absolute need for the coach. You have to be able to PROVE your absolute need.

I think if I give you a comment on the two primary court cases that had referrals to the use of a coach in a business. One was a husband and wife who were consultants and they took the coach for an office in home. They got knocked out of the box because the area for an office in home has to be "exclusive" use as an office. Obviously a coach has much that is not exclusively office so they lost. The second one was a physician that used the coach for sleeping and relaxing between shifts at the hospital at which he worked. He was audited and when the auditor threw out the RV deduction he took the case to court. He lost on the overall deduction but the court did allow him the $.56 per mile to go to the hospital.

There were two situations that I have seen that I believe would stand up under audit. One was an individual who had to evaluate cell phone towers. Most of these were out west and hotels or motels were few and far between. He used the motorhome as his transportation and accommodations for his trips. He also used the rig personally and took the appropriate percentage off his RV expenses. The second one was an executive who required a great deal of travel. He was undergoing cancer treatments which made it almost impossible for him to fly for business. In his case the RV became his primary business transportation and accommodation.

I think that either one of those situations would have made it through an examination and possible court challenge. Again, these are very rare situations and agents tend to really follow that "necessary and ordinary" requirement for business deductions. Your need for the RV has to be one of more necessity rather than one of making life easier.

[ama009]

Very interesting to hear your side of this wnytaxman! I was going to put my MH purchase under my LLC after speaking with several co-workers that have them listed as mobile offices. We each have large sales territories and most far from home. Then again, i havent heard that any of them being audited so idk if it would hold up. They serve as office and home during the week and only go out 5 - 6 weekends a year on personal.

[wnytaxman]

Originally Posted by ama009

Very interesting to hear your side of this wnytaxman! I was going to put my MH purchase under my LLC after speaking with several co-workers that have them listed as mobile offices. We each have large sales territories and most far from home. Then again, i havent heard that any of them being audited so idk if it would hold up. They serve as office and home during the week and only go out 5 - 6 weekends a year on personal.

I would suggest putting your rig in an LLC as being a good asset protection device. The question of its use for business will depend on a lot of different factors. For example, let's say your sales territory was Eastern Montana. Now there are not a lot of motels in that part of Montana. If that were your territory then I would make the argument that you have to use your RV for living accommodations when you are out for business.

A different twist to the idea would be one where you have to pull a trailer with samples or your tools or some other reason that makes the RV a "necessity." That is always the key. It's a matter of completing this sentence, "I have to use my RV for business because......" In the case of using the RV for business you have to have a very good reason for the business use.

As a CPA we can't subscribe to the theory that everything is deductible until you get caught. We can't and won't work that way. Tax audits have a whole bunch of unique features. The most unique of which is the personality of the auditor. You may be beyond what the law allows and have an auditor not even blink an eye. Or, you may be totally within the law and have an auditor have a conniption fit about your return. It just depends on the auditor and how they view you and your return. Many non-RVers assume that anyone with an RV is rich which doesn't help the idea that the RV is a "necessity" for that business in the eyes of the auditor.

[TQ60]

Question to ponder...

What about leasing?

A non - informed person here but many company vehicles are leased and it seems the lease is a simple expense where a vehicle has many sub lines of costs that get difficult.

Could a business lease the asset from private party to deduct the cost then private party take lease income and subtract asset cost (payments and maintrnance) to maybe zero out the income?

Just seems like one option but that may be worse...Just a question though.

[wnytaxman]

Originally Posted by TQ60

Question to ponder...

What about leasing?

A non - informed person here but many company vehicles are leased and it seems the lease is a simple expense where a vehicle has many sub lines of costs that get difficult.

Could a business lease the asset from private party to deduct the cost then private party take lease income and subtract asset cost (payments and maintrnance) to maybe zero out the income?

Just seems like one option but that may be worse...Just a question though.

Good question and an interesting one. I think you still have the "necessary and ordinary" hurdle to get over. That is the biggest one. Let me give you an example. As a CPA I do a certain amount of traveling and I have vehicle expenses. Let's say I lease a Kenworth semi and deduct the lease payments. What's my justification? That's where the big hang up comes in. What can I do to make that lease necessary? I don't have an answer to that question so I'm probably SOL (slightly out of luck) on the deduction.

[TQ60]

True the justification switch must be satisfied.

It seems that it is an easier "process" to claim a single lease expense rather than depreciation, mileage and the ton of other expenses that all would need to be there to "add up" to show proper fileing.

Seems if one was claiming a given asset as business expense that all expenses related to given asset also need to be there and a good auditor may notice issue if some are missing and due to just that it gets their attention where a simple lease expense may not do so.

Again not any kind of training on taxes just comments on observations for pros to comment on.

Interesting thread...

[wnytaxman]

Originally Posted by TQ60

True the justification switch must be satisfied.

It seems that it is an easier "process" to claim a single lease expense rather than depreciation, mileage and the ton of other expenses that all would need to be there to "add up" to show proper fileing.

Seems if one was claiming a given asset as business expense that all expenses related to given asset also need to be there and a good auditor may notice issue if some are missing and due to just that it gets their attention where a simple lease expense may not do so.

Again not any kind of training on taxes just comments on observations for pros to comment on.

Interesting thread...

Tony, your comment is very much spot on. Claiming a Section 179 deduction for a new RV at $400,000 is very likely to draw scrutiny as opposed to a vehicle lease expense of $4,000. Add to the Section 179 deduction the fuel, insurance, tolls, etc. and you can see some red flags going up. On the lease side you would still have some personal component to deal with as there are lease tables that indicate how much personal use is added back.

Tax is always an interesting area because very little of it is pure black and white. Much is somewhere in those 50 shades of gray and determining whether they fall on the light or the dark side of gray is always a challenge.

[KarenBa]

This is a very old post, but I figured I will give me two cents ( I did some tax research prior to getting into the RV thing).
What I learned is this:
The IRS considers an RV a lodging unit. Lodging units are residential property. Residential property is not allowed to take Section 179 expense. You can still take regular depreciation but just not Section 179. Read here

[wnytaxman]

Originally Posted by KarenBa

This is a very old post, but I figured I will give me two cents ( I did some tax research prior to getting into the RV thing).
What I learned is this:
The IRS considers an RV a lodging unit. Lodging units are residential property. Residential property is not allowed to take Section 179 expense. You can still take regular depreciation but just not Section 179. Read here

Karen, to take Section 179 or even regular depreciation the rig would have to be either a rental unit for regular depreciation or being used for business purposes for both regular depreciation and Section 179. Proving more than 50% business usage can be a daunting task, but not an impossible task. It would require a ton of documentation to possibly stand an audit.

[TXiceman]

The best advice you can get on any website is to talk directly to a tax accountant and let them review your situation.

Ken

[barmcd]

I purchased my coach from a business. The PO owned a jewelry store and traveled to fairs and such selling jewelry. Buying from a corporation complicated the transaction somewhat as my CU needed some paperwork from the business identifying the PO as an officer of the corporation authorized to sell the motor home. No big deal, but it wasn't a 15 minute transaction like it would have been had the owner been a private individual.