Question regarding leasing exotics/luxury cars

Guys I'm hoping to get some insight on the topic of leasing.

My CPA has advised me againt leasing anything that would be considered "luxury" or "exotic". I can understand this from the perspective that you don't want to draw unneccessary attention at having a chance of being paid a visit from Uncle Sam's collection agency. However I do see people on this board and others whom have leased their 'high end" rides (Lambo's, Ferrari's, Benz, etc.) under their businesses.

So my question is if my CPA is just being too conservative (and rightfully so) or if they are wrong and that there is no limitation or intrepretation from the gov't as to what is considered a luxury or exotic car?

Appreciate any input.

Thanks.

 

Your CPA is giving you prudent advice.

The first question to ask: assuming you are audited by the IRS, would you feel comfortable explaining the business purpose for your leased Ferrari? I.e., would you as a prudent businessman and good steward of shareholders' money lease a Ferrari, or a different vehicle?

The second question is whether you think a Ferrari appearing on your tax return is likely to be a rosso corsa flag as the IRS determines who to audit. I would guess that you would look like a hunk of bloody meat floating in the sea of taxpayers.

I'm not a tax professional, so don't take this as professional advice. But if your business is successful just pay yourself more and buy the Ferrari.

 

If you want to Lease a Ferrari, don't let a CPA talk you out of doing so.

Now for credentials, Former IRS Agent, CPA, Admitted to Practice US Tax Court. My practice is devoted to defending people from IRS Audits, Collection and Tax Court Matters. And no, I'm not looking for additional work.

1st, No need to put Ferrari, Mercedes or Volkswagen on tax return when CAR does just as well. You aren't going to be able to deduct 100% of your lease payments, because you don't drive the car 100% for business.

2nd, You will have to add back income due to the cost of the car exceeding certain limitations. Look them up. So, don't think you can deduct 100% of the lease payment.

3rd, Audit percentages; less than 1% of all tax returns are audited. So, the audit lottery favors your rarely getting an audit. Don't take this as a license to go to the dark side, Luke.

4th, I've heard of the Criminal Investigation running high dollar car purchases and tying these to tax returns. They then determine if tax return income justifies such a purchase. But, never have I heard of an audit being predicated on your choice of cars.

By the way, I have a Ferrari, purchased new. But, I don't use it for business, nor will you find it on my tax return. It's not a daily driver.

Rather than worring about the IRS I suggest you take a look at your clients and view the purchase from their perspective. Will they resent the purchase of a Ferrari Business Vehicle.

Don't make a purchase based on tax laws, that's like the tail wagging the dog.

 

Your CPA is a POS.

You only draw attention to yourself if you try and deduct it.

Look at your cost and use of money first......as well as the current and projected future value of the F-car in question.

And.....ask the CPA's you are going to start interviewing next week if any of them have ever leased a Saturn. Stay away from anyone who says yes.

 

Makes sense.

As long as your cellmate doesn't know what you're in for.

 

The OP didn't actually say (and perhaps he doesn't know) why the CPA made the recommendation about staying away from luxury and exotic cars.

One possibility is that CPA is concerned about the OP's financial condition (which the CPA would know about, and we sure wouldn't) and is making a prudent suggestion about how his client should be careful with his money. Maybe the CPA thinks the OP should reduce other debt, reinvest/expand physical plant, increase the workforce, develop and/or renew sales efforts......who knows?