Ferrari = Business Expense?

How quickly can you say "Tax Audit"

 

+1

Its really easy math
Ferrari+writing off as business expense=Audit

You better have a car rental agency and be able to prove you rent the Ferrari out.

 

I dunno...worked for these guys...
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Just don't put the car in the business' name.

Anyone remember the story of an Fchatter who got his Ferrari for free by buying his old company. Don't be the guy who sold that company.

 

Deductions for business use of cars is limited. 1st yr Depreciation for 2009 is $2960 for used, $10960 for new, decreasing to $4800, $2850 and $1775 in subsequent yrs.

These amounts need to be reduced for personal use, which includes commuting; IRS will not usually buy 100% business for a passenger car.

Car deductions also require more tax return disclosure than most other business assets.

Also, you have the risk of running into the "reasonable and necesary" expense catchall i the event of an audit. The theory (court upheld) is that a Hundai will get you there the sams as a Ferrari

Summary: it aint worth it!

 

Just buy the freaking car and enjoy it. Leave accounting out of it. They make no economic sense whatsoever.

They make perfect sense when you're sitting in the driver's seat.

 

Indeed it did.

Best law enforcement documentary every, IMHO.

 

Bite your tongue Bullfighter - as a 328 guy I am disturbed by your comment.
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What about a breadvan ?

 

Yea, I would not go in this direction. Search the IRS limitations on fringe benefits and you'll get into mileage limitations and other restrictions. Most likely, after your audit, the value of the Ferrari would be added as income and you'll pay the tax one way or another, plus penalties. Put it in your company name, get in an accident and then your balance sheet becomes mouth watering reading for the attorney of the other driver (regardless of fault). You're most likely a target defendant anyway (because of your income) no sense in making it easy or fun for somebody looking to clean your clock. I vote no.

 

Not worth the headaches that come with doing it that way.

 

Non cash compensation is treated same as cash- you pay tax on it. Corporations cant make "gifts" to employees.

 

If you put your company log on it and use it for advertising and promotional events, it would be a little easier to justify. It is also better to lease a company car rather than purchasing it. If the car is leased, then 100% of the expense can be depreciated (assuming 100% business use). I too would be hesitant to say 100% unless it can be documented.

 

IRS Rev Proc 2009-24 requires that a taxpayer who leases a luxury car for business has to include an amount as specified in 2009-27; Sec 4.03 in income to partially offest the business use deduction.

The Govt has seen most tax savings tricks by now and has implemented counter measures.

Man, I love it when clients tell me about the foolproof tax avoidance scheme they heard about in a bar!

 

But at the end of the lease you hold no interest in the car, whereas if you own the car you can recover the difference between the allowed deductible vs the lease deduction when you sell the car. So for corporations leasing is better but for sole proprietorships, one-man LLCs and the like it is financially better to buy the car unless you need the cash flow or unless you predict severe depreciation.

 

This is it in a nutshell.......maybe a few can post here if they have truly "made it work"...

But given the fun of an audit of any kind the LAST thing I would enter into any part of a Tax Return is the word Ferrari, and I use and enjoy my car on business and in many Charity related aplications...

I just take the standard mileage deduction....LOL!

 

BE WARNED!!!!...... Tax Audit

I know a guy who said his porsche was for "Marketing and Advertising".
During the Audit, the IRS said "Unless you have company name on the door"...FAIL.

He had to pay up.

Honest advise...Don't do it unless you want to get audited.

Thanks,
Uzy

 

Good point. Unless you own a auto rental company, I would find it difficult to be able to pull this off successfully.

 

By pass that crap and make your payment on Amex...have a lease company put it in as a payment with no descrip...Just a car lease

Amex is T and E..

not that I would do such a thing.

 

Get the car "wrapped" with your business logo. Might look goofy, but it would get attention and go a long way towards legitimizing the deduction.

 

The logo is key to making this work. Also, if you own the car, depreciate it over time and then re-sell the car, the depreciation will get factored back in on your taxes. I believe that it is called "recaptured depreciation". talk to an accountant.

Lots of companies have made this work before, just not with a ferrari. It can be done, you just have to make sure that you actually use it for a few promo events so you can justify it to the IRS.

A hummer is expensive too. You wouldn't have to go nearly that far with the graphics to make it "advertising"
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You will also have to explain the corporate ownership at resale time. Some people will see that on Carfax & immediately think "rental car".

 

Back in the 80's my dad used to get a new company car as compensation every 2 years. He had a Porsche. Now, this was the 80's. The company didn't get audited, but today's world is much different.

Since my business is photographing just Ferraris I've considered this. It might work, but it would significantly raise my odds of getting audited. In the end, it wouldn't be worth the savings in taxes for the headache of an audit.