Taking your Porsche as a tax deduction

[dhopkins]

Has anyone on this board ever tried to take their early Porsche as a business expense?

[EARLY911ZOO]

I tried claiming what i spend on Porsche cars on the grounds that it is an equivalent or better(way better) treatment than past psychotherapy that benefitted from tax deductions. Plus while I am not making any money but rather spending big on a legal addiction, I'm not out stealing cars or thinking of shooting people. I thought for sure they'd see the light.

[silverc4s]

Just my view: If you use your vehicle in your business, you can deduct that part of the operating costs as a business expense, subject to some limitations.
You can also deduct some part of the depreciation, but since these cars are appreciating, you could have actual business income to declare...

Disclaimer: I am not a tax consultant of any kind, but I have stayed in a few Holiday Inns in my time...

[berettafan]

specifics?

business mileage at the current rate (forty some cents per mile) is in place of depreciation, gas, insurance, etc. it doesn't matter what vehicle you are using but rather the fact that it was used for a legitimate bsns purpose (other than commuting). keep a contemporaneous mileage log btw.

now if you're talking about depreciating 100% of a collectible sports car in a business then you need to be prepared to show proof that 100% of that vehicles useage was business related.

now, if you're a flipper then said early Porsche is actually inventory...but that's another thread.

[dhopkins]

Recently the Wall Street Journal printed an article detailing the requirements for distinguishing a hobby from a business. If something is a business you can deduct expenses (after accounting for any revenue). Many of us sell parts from our Porsches that we longer need, or perhaps parting out a car, etc. So if I called the money that comes in from selling Porsche parts revenue (e.g., recently I have sold seats, a fuel pump, a speedometer) and subtract the money I spent on the car it came from as an expense (and can support that this qualifies as a business rather than a hobby) I could potentially take any loss as a tax deduction.

NOTE: I am not recommending that anybody do this nor am I a tax professional nor do I have any tax expertise, I am just wondering if anybody has thought of this or actually tried this or sees any flaws in the above idea?

[berettafan]

IF you are parting out cars for profit then any purchased vehicles to be parted out are INVENTORY. the cost (prorated as it were) does not get deducted until you sell the part.

Go to IRS.Gov and look for 'hobby loss rules' for more info on what a hobby is.


Erik D. Quisgard, CPA

[JCR]

I'm by no means an expert, but... to be considered a business it needs to be demonstrated that you or the entity is genuinely attempting to make a profit. Also there are certain things that need to be in place... financial records, business cards, letterhead, website, annual meeting minutes and registration with the state are typical examples.

My car is kept at our office, which is a design studio, sometimes it is uncovered and "on display". Because it is a widely recognized example of what good designers strive for as far as design timelessness, it can be used to inspire employees, educate clients and show that we understand good design. Thus it provides an element of intangible business value. At times, some parts may need to be purchased, and maintenence performed to keep it in presentable condition. These parts might happen to fall under the general office expense category, which is of course a deductible expense.

In my case, there really isn't a legitimate way to deduct the cost of the car - and if I could it would have to go on a depreciation schedule anyway (nevermind that it's appreciating now). Also, a big number deduction like that for a small business would likely get some attention.

[Gearbox]

Very shaky ground. The possible legitimate deductions would be if the car is being used as a display for marketing in which case it turns into an asset on your books and depreciated over 7-15 years. So the deduction would be in those even increments at the lower of cost or market. Then if you sell the car, any amount over depreciated value is treated as capital gains and taxed at that rate. But if you use the car for any personal reasons, you have to keep track of mileage and it is added back as income. Plus this may give the IRS a reason to decline the entire deduction. Remember, when it comes to the IRS, they have the last say. They do not have to listen to any court judgements and could make it up as they go along. The epitiomy of the "WE SAY SO Corporation". As others have pointed out, mileage for acceptable business reasons will work. But if you own the business and not a independant vendor, deductions to and from your business is not an legitamate deduction. Deliveries, going to meetings, and anything that generates income for the business would be acceptable (maybe). Bottom line, trying to deduct the full purchase price of the car or the lease payments will raise a red flag and the penalties and interest are just not worth it. Then it just opens more things that they will look at. Cars, boats, and home office deductions will put a big red bulls eye on your head for high gain audits. My suggestion, fly below radar, the less you get noticed, the better off you will be. Good Luck.

[ennisk1]

Good luck! My wife, who is an expert when it comes to this, pretty much has determined that unless you are doing quite a bit of business selling cars and parts, it is not worth the hassle. She is also always quick to point out that no matter what you do, the IRS will always find a way to collect what it is owed. Especially if you try things that are less then legal!

[dhopkins]

Ok. Here's an alternative. Write an article, case study, write a term paper, do a masters or doctoral dissertation about Porsche, its history, its designs, etc and deduct your car as a research expense.