Mileage Expenses Deductible when not paying expenses of vehicle

[jnkniffencpa]

Can a dependent taxpayer claim a mileage deduction on Schedule C for a vehicle that the parents pay all of the expenses for?

Thank you

Jeremy

[Just-Lisa-Now-]

who owns the vehicle?

[IRonMaN]

I'll cast a "no" vote.

[rbynaker]

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@IRonMaN wrote:

I'll cast a "no" vote.

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Sorry, "no" votes are no longer allowed.

[IRonMaN]

I forgot about that.  Can I revise it to "nay"?

[jnkniffencpa]

The son is on the title but the car was leased and paid for by Dad

[qbteachmt]

How would you prove to the IRS that these costs were incurred by the taxpayer, when they were not? That's pretty basic to the rules.

[Accountant-Man]

Do you mean AFTER the parents gift the money to the dependent? 

[qbteachmt]

"The son is on the title but the car was leased and paid for by Dad"

Nothing like helping your child succeed at business by modeling such great behaviors.

[BobKamman]

How is it different from parents paying a cash allowance ("gift") to the kid, which he uses to pay his car expenses?  Substance over form -- it's still a gift, if they pay it directly.  If the kid is a minor, they have an obligation to support him, but that doesn't include paying his business expenses.  

If the kid has the job to make money to pay his tuition, but he's still a dependent, who gets to claim the tax credit?

[BobKamman]

Maybe the kid's job is running errands for the wealthy grandmother.  

[qbteachmt]

"Substance over form -- it's still a gift, if they pay it directly."

Then, I would ask for supporting documentation. Show me the receipts and the lease payment and package this together with the proof of this all as gift "paid on his behalf." And show the part that is business, to prove junior didn't get the benefit of the costs for personal use and is trying to flow it through the business. Or that junior has a different vehicle for personal.

It's simple: do it right.

[BobKamman]

You would make a great IRS auditor.  I'm better at winning audits.  

[qbteachmt]

"You would make a great IRS auditor."

Well, I have had to help with a few. Not just IRS audits; a big part of my client list is governmental entities for the State of Montana, Towns and Counties and Special Purpose Districts. I have one that we got from an audit every other year to every three years, now. Whew. That helps.

"I'm better at winning audits."

Here's the phrase I use with my clients: It's always better to do it right, than to do it over.

[BobKamman]

My only experience with helping local governments involved advising a county about how to treat its salaried court reporters who took work home to transcribe hearings on their "time off," with the cost paid through the county by attorneys or parties who requested the transcripts.  I said they were still employees.  IRS replied to an SS-8 that they were self-employed.  (I wasn't the one who filled out the SS-8.)