Registering the car at Montana LLC

Have anyone purchase and register the car under Montana LLC, under a law firm Heggen Law Office? Any pros and cons? Anything need to be aware of? Thanks!

 

Cant help; but purchasing and registering a Ferrari as a business deduction would make me nervous of an audit (no facts or stats to back up my concern). I would more likely lease it in this case.

*I have never leased a car.
**I am too chicken to do anything that might land me in an audit.
***For personal use I do not like the lease math, buying is better of you have the cash flow.

 

The more of these "shady" things that show up on your return the more likely you are to be audited.

 

This comes up every few months - try a search on 'montana registration'

 

+328

There must be at LEAST a dozen threads on this shady subject - 2 or 3 of them
in just the last 30 days or so.

Jedi

 

Many have used the "Montana" "skip sales/property tax" in my area but is it worth it?

Many threads on this but I dont think its worth it. Is it worth saving on taxes to get an audit. Once you get an audit the Montana scheme will get blown wide open.

You have to pay to play, I do things myself by the book, painful at times to pay taxes but I enjoy sleeping at night

 

Long and the short of it: $15-$1800 to set it up and save the sales tax, that's it and yes it's completely legal.

 

IMHO, I don't think the savings of a few thousand outweigh the risk and cost of a full blown audit.

 

More details please ? how can it be legal ? Technically as I understand it, you have 20 days to register the car in your state when you buy a car and I have heard of some cops keeping track of cars they see regularly with out of state plates and after some time pulling them over. I don't understand how this could be legal but maybe I don't have all the information yet.

For the record, I paid $4041 + lic/reg when I got my 360 a month ago, so I did not avoid the CA tax issue But I will admit I was tempted to try that Montana thing when I could not get passed smog, that was the only reason I was tempted. I sleep very well at night knowing that a audit would be a major pain in the derrière and there would be no issues.

 

I also sleep good at night knowing i help pay my police to protect my house!! In my area not Montana!!! it was kinda like when i did not pay taxes on my boat and said in the time of war the Govt can come get my boat and use it!!

 

I did research and documented my findings on Montana LLC for this purpose. I even contacted the law office mentioned and the other main one for doing this. They will send you the rules applicable to your home state, free of charge, and you can decide if it is right for you after that. You can read my findings in my thread: http://www.ferrarichat.com/forum/showthread.php?t=341845 . The rules of your home state regulate what steps need to be taken to do this legally and correctly (ie appropriate nexus to Montana), as opposed to a shell LLC which rarely passes muster, then it becomes a financial/burden choice if it is worth it. To be clear, this can 100% be done legally, such as having the Montana LLC own real property or conduct other business in Montana, but then the practicalities of it may not make sense, as they did not for me for my humble 360's cost (especially as Ohio only taxes 6.75% upfront, and there is no annual use tax here, and I do not like selling my cars and upgrading freqently).

As I also mentioned in this related thread, http://www.ferrarichat.com/forum/showthread.php?t=367963, I've not done this strategy personally and have no plans to do so. I know people in other states that have decided otherwise (just shell LLC to own car) and have yet to have a problem with this strategy (not that they won't eventually, be it at a speeding ticket or other trigger point).

Finally, realize the difference between sales and use tax and income taxes when you are talking about audit fears. The point here is not income tax savings with LLC deductions and writeoffs (which would be foolishly risky IMHO audit wise), but to save on sales tax and in some states, annual use tax, which could easily be $15k+ cost over a couple years on a F430 spider in CA or another high tax state with high annual use tax. Please also do not make this a moral decision, it is a business one whether it makes financial sense to pay the applicable taxes in Montana (assuming you have the appropriate and needed nexus to make this legal) or your home state. If you just love your home state so much and want to pay whatever taxes they assess in all circumstances, then by all means do so and don't forget to write your state's treasury dept a nice fat Christmas check as well. For those who flip expensive exotics, I'd talk with an attorney and at least evaluate your options (and please share your findings back here as well).

 

i've heard people claim it as a "gift" or $500 as a value. whats your thought on that?

 

If it isn't actually a "gift" it's called TAX EVASION. If it's REALLY a "gift" it's legal tax AVOIDANCE



Jedi

 

Well, as Jedi said, if you lie and mischaracterize it, that is tax evasion and illegal. Further, I'd think you might be liable for gift tax for value above $13k, which would be at your marginal income tax rate for that year. (not sure about this, I'm not an accountant)

Also, how then are you going to escape paying capital gains tax when you sell it, if your basis is $500 and you sell for $140k, you have a $139.5k capital gain. If short term capital gain, then it's taxed at your income bracket, and if long term (1 year +), it's taxed at 15%, both of which are worse than paying sales tax and/or use tax.

There are legal ways to avoid sales tax on cars. The main ones are (1) become a licensed car dealer or (2) establish an out of state entity with appropriate nexus to that state (real property, other business purpose, ect) in a low tax state (montana, alaska, ect) to own the car. It's a bit of a PITA to actually do this right, however, and carries it's own expenses and burdens. I wish there was an easier way, but there is not that I'm aware of.

 

Another thing to remember is how will your insurance situation be affected? With respect to car dealers, I believe insurance on exotics will be insanely expensive. If your LLC owns the car, then the LLC needs to be named as an additional insured on your personal policy (just as you would name a lienholder on the car as an additional insured) becuase otherwise, if you are in an at fault accident, the injured person may try to sue your LLC to collect (which would not then have insurance), and as you own the LLC, you would then become personally liable as if you did not have insurance. If your LLC is a shell, then bankruptcy to discharge would not work as the corporate veil could likely be pierced. I could be mistaken about the exposure of the LLC here as insurance is supposed to follow the car, but that would definately need to be verified and I would not want to keep your insurer uninformed about the fact that a LLC actually owns the car, not you personally, for fear that the policy itself could be void and refuse payout for misrepresentation.

The good news though, is that it should not be too hard to get your insurer to add the LLC as a named insured on the auto policy. I've not actually done it, but told it should be nearly as easy as naming a lienholder as a named insured.

 

Just as a footnote, this forum section is "Public Google Searchable" unlike the subscribed sections...

Just sayin'...

Jedi

 

good topic, since i bought couple cars a years and change them all the time. this is a good option to avoid tax in cali. or just screw it and just paid for it.

 

I'd be more interested in registering in a state that does not require a front license plate.

 

so in other words you create a LLC in Montana and then the LLC owns the car.

Way too much work for me, creating a LLC was a pain in the ass for Calif. I can't even begin to imagine what it might be like to create one out of state and the costs associated with that. I am glad my car passed smog and I did not have to go that route. That was the only reason I was curious about this, I was more than willing to pay my Calif. taxes/registration (I already had before I found my smog issues anyway), just was worried i would not pass at all and I was told I could get it reg'd in Montana and not worry... I would have worried

 

oh yes me too. try San Francisco, they give you ticket even when you parking !!!!!!

 

My guess is they can only give you a ticket for no front plate while you are parked, as it's not a reason to be able to pull you over if you are otherwise following the law. If you get hit for speeding, then they can add the no front plate on as well I think. That is how it works in Ohio, and yes I hate this damn law. None of my cars have a front plate, I absolutely refuse, so it has to sit under the seat or somewhere and I have to put it on the dash everytime I park on public streets (which is really not too often). They cannot give you a ticket for no plate parked while on private property (driveway, private parking lot or garage, ect).

 

In NY you can get pulled over for no front plate.

 

I do the Montana LLC for my non-daily drivers...no problems at all

$1500-2k setup

$150 a year

I think my 360 reg was $200 PERMANENT...no annual fees...

Saves me a ton on sales tax....however I wouldn't recommend it for cars where you are going to get pulled over alot in CA (Ariel Atom)

But for the cars i drive once every week or two, works fine for me

 

In CA a gifted auto is taxed at market value. If you list the sales price as something ridiculous like $500 they will adjust the price to market price. Ignoring the legal issue, you may have a little wiggle room but not much.

 

Newest issue of Sports Car Market has an article about Montana registration.