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Old 01-19-2017, 08:14 AM   #1
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Court Disallows RV Business Deduction

The Ninth Circuit Court of Appeals disallowed a couple a business deduction for their RV. The couple were insurance agents who attended RV Shows and Rallies to sell RV insurance. The IRS challenged the deduction on the basis that they lived in the RV more than 14 days a year and that there was no separate "business office area" in the RV.

The Court decision serves as a bit of a warning for taking a business deduction for an RV. You may be justified in your thinking but you never know when you may get tripped up by a more obscure part of the tax law.
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Old 01-19-2017, 08:22 AM   #2
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I'll probably strike a nerve with someone, somewhere here, but with all the tax deductions and tax rebates given to big corporations, businesses and such these days, you'd think that a couple who are actually using their RV to make a living could get some kind of tax relief, wouldn't you?
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Old 01-19-2017, 01:22 PM   #3
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The one fact that I don't know is whether or not the couple took a deduction for the entire RV. If they did, that is what probably triggered the audit. We have an expression that we use a lot at tax time.....Pigs get fat and hogs get slaughtered! Being a little piggie can be fine but being a great big hog can get you a ticket to the IRS audit slaughterhouse.
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Old 01-19-2017, 02:35 PM   #4
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This seems very complicated. A $200 / night motel is deductible but a $50 / night RV is not. A $700 plane ticket is deductible, but .58 / mile for the RV is not?

In my case, I would just like to offset the meager earnings for my hobby, not trying to get out of paying taxes altogether.
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Old 01-19-2017, 02:57 PM   #5
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Quote:
Originally Posted by wnytaxman View Post
... separate "business office area" ...
And THERE's the rub. I researched this before I went 1099 so I knew what I could deduct as a business expense. My tax advisor stated there has to be a dedicated, strictly for business & nothing else, area in my home if I want to take an office space deduction.

Not that it couldn't be carved out in an RV, but it is a small space with an open floorplan & probably difficult to segregate a space where only business is done.

It doesn't seem fair when, as Scottybdivin stated, the entire cost of a hotel room & board on a business trip can be deducted, but that's the way it is.

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Old 01-19-2017, 03:33 PM   #6
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I follow many YouTube full timers. There are a few that have partitioned off a section in their RV (both motorhomes and 5ers) to be the office. One couple took the bunkhouse in a 5er, and took the bunks out and made a wall, with door and the hubby does IT work from. Another RV couple took out the dinette and built two built in desks to hold 4 computers.

They have produced many many videos on everything about full timing except how one files taxes. Which is a smart move on their part.

Maybe the new incoming administration will clean up" the "Tax Code". Good luck with that one.
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Old 01-19-2017, 03:48 PM   #7
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Dedicated office in an RV? Check.

Details start at 4:32
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Old 01-19-2017, 04:03 PM   #8
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agree, just like using your home for business. A separate area just for the business is key to claiming the deduction.

i got audited a few years back and had ledgers that were digital for rental house expenses, IRS wanted PAPER logs vice an excell spreadsheet with mini documents in the margin..even though the rules only state a ledger or log.
We argued long time over it...end the end i was a small fish and got a fine.
then a few days later the auditor called me at home on a sunday morning
he changed his mind and cut fine down to nill and allowed my excell spreadsheet logs.
I about passed out cold.

moral for me is stand your ground if your right...be humble of your skirting the right side
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Old 01-19-2017, 04:13 PM   #9
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Just guessing here but deprecating the RV is what got them in trouble. Taking a standard millage deduction and an amount per day that was for business use would probably pass.


good luck

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Old 01-19-2017, 04:27 PM   #10
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Home business deductions can be tricky. Using an RV for such will complicate it even more. They made a couple of mistakes as out lined in the order. Also this case goes back to tax years 2006 and 2007.

If you wish to read the 5 page court order -

https://cdn.ca9.uscourts.gov/datasto...9/14-73680.pdf
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Old 01-20-2017, 06:48 AM   #11
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Quote:
Originally Posted by Scottybdivin View Post
This seems very complicated. A $200 / night motel is deductible but a $50 / night RV is not. A $700 plane ticket is deductible, but .58 / mile for the RV is not?

In my case, I would just like to offset the meager earnings for my hobby, not trying to get out of paying taxes altogether.

More than likely they didn't take the mileage deduction but the actual cost deduction which includes depreciation. That could have been a pretty substantial number. When you add in fuel, insurance, and all the other associated costs, the deduction could have been pretty sizable.
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Old 01-20-2017, 02:00 PM   #12
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Probably better just to take the mortgage/loan deduction as a "2nd home", but deduct mileage and lodging (cost for camping sites) under their business. They couldn't claim depreciation of a "business asset" but it would give some relief. Not sure where the "14 days use" has any applicability though?!?
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Old 01-20-2017, 03:00 PM   #13
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Probably better just to take the mortgage/loan deduction as a "2nd home", but deduct mileage and lodging (cost for camping sites) under their business. They couldn't claim depreciation of a "business asset" but it would give some relief. Not sure where the "14 days use" has any applicability though?!?
Scot the 14 day rule has to do with the rental of vacation homes. That rule has been around almost as long as I can remember. It limits the deductions for expenses that can be taken for a vacation home rental. It was meant to limit the losses that people were taking on their vacation homes.
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Old 01-21-2017, 06:55 AM   #14
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Originally Posted by wnytaxman View Post
Scot the 14 day rule has to do with the rental of vacation homes. That rule has been around almost as long as I can remember. It limits the deductions for expenses that can be taken for a vacation home rental. It was meant to limit the losses that people were taking on their vacation homes.
Ahhhh, okay, that makes sense.
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