Level 2

Question

Legitimate deduction

Forum|Forum|2 years ago
September 17, 2023
6 replies
27 views

Hello,

I have a tax client who bought a $35,000 vehicle for his business. He did not have it insured yet, and his daughter took it and got into an accident and totaled the vehicle. What portion is deductible on his sole proprietorship return? Can I claim the whole thing as a loss? I can't find any really good or detailed information on how to account for a partial or total loss on his Schedule C .(The daughter is 16 years-old).

Thank you

ProSeries Basic

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BobKamman

Level 15

Would the client happen to be your husband, on a joint return?

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PATAX

Level 12

Shipping off to the Johann Strauss Concerto? How Marrrrrrrrrrrrrvi.😉😁

IRonMaN

Level 15

Ok, you got me curious. How many business miles was the vehicle driven before his favorite daughter Crashalina took it for a spin?

Slava Ukraini!

B

belva333jAuthor

Level 2

A. Not my husband.

B. Drove 226 miles before daughter crashed the car.

C. Is any portion of it deductible?

ljr

Level 9

How did they spend $35K on a car and not have insurance on it? If it was bought at a dealership how did it get off the lot without it? I'm just curious what state? I don't see a business loss here but . . . . . I guess the daughter will be doing a lot of free work for Dad's business to pay it off.

qbteachmt

Level 15

Here's the reality: They are lucky the daughter didn't put them into the high risk category of a lawsuit expecting this "business vehicle" to be backed by deep pockets. In other words, depending on if she caused property damage and/or bodily harm, even to herself, he could be sued for everything if he wants to continue to take the position this was business-related, including losing his business and any personal assets to a legal judgement. And it's his daughter that could be the plaintiff, even. Especially, it gets even worse if they keep claiming this was business-related and she was "doing the business" on that trip, because now you have worker comp considerations, as well.

I recommend they suck up personal loss and move on. The IRS really doesn't care about this sort of mess.

Don't yell at us; we're volunteers

qbteachmt

Level 15

I've been thinking further on this part: "He did not have it insured yet"

Are they sure? I've dealt with lots of vehicle insurance providers, coverage, and claim issues (OMG, I've worked with/for some bozos...). Every policy included automatic coverage for a new-to-you vehicle for some provisional amount of time, allowing you time to contact them to get the coverage after purchase. Also, the driver's own insurance should have some sort of coverage for driving another person's vehicle.

Don't yell at us; we're volunteers

PATAX

Level 12

@qbteachmt both of your posts were excellent and you raised great points. You hit home runs on both of those. Did you eat Wheaties this morning for breakfast?

qbteachmt

Level 15

"you raised great points"

Well, heck; there still is the opportunity to file Grand Theft Auto against the daughter! Might as well explore all possibilities.

Don't yell at us; we're volunteers

T

TaxGuyBill

Level 15

@belva333j wrote:

What portion is deductible on his sole proprietorship return? Can I claim the whole thing as a loss?

The business portion would end up as a loss (essentially, the vehicle was 'sold' for $0). But unless the daughter was driving for the business, it would not be 100% business.

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