I am working with a Corp. (one shareholder). He has a commercial truck that is under his name and also the truck loan. Can the Corp. depreciated?

[palmasservices]

He purchased the truck in 2019.  He made all truck payments from the Corporation.  I am not sure if I can depreciated or do I have to input the payments as rental income in his personal tax return and depreciated there.  
(if so, would I use Schedule C or Schedule E).

[qbteachmt · Accepted solution]

Is your shareholder an employee of that corporation? If so, you have a situation of Business use of Personal Vehicle.

The corporation cannot Depreciate a vehicle it doesn't own.

Making the payments for the corporation (C? S?) doesn't make anything here Business. It simply means he took money for Personal needs. What it was used for is never part of the business. However, you need to know if that is supposed to be part of payroll or was a distribution or a shareholder loan to be repaid or what?

Would you state this person really is running their own business (Sched C) as a Supplier of goods or services to that Corporation? Is that really what exists? Only you and that person can describe what is going on here.

I would not treat the payments as rental against the vehicle, unless he really is in this business (such as a Drill Rig or vacuuming parking lots or truck-mounted paint sprayer would be businesses), offering this service to the corporation, does not Work for that corporation, and you know the insurer and lender would allow this. Otherwise, you might find the person and vehicle become unexpectedly uninsured without recourse, because now you created a For Hire relationship.

Is this a mixed use personal vehicle? You stated "commercial" but not Specialty vehicle. There are some over-the-road trucking arrangements for owner-operator where the employee leases his own semi-truck to the corporation hiring him as an employee. Is that what you have?

An employee cannot report Vehicle Expenses for their job at the Federal level (form 2106). They might be able to at State level, as long as they meet the requirements.

Have you considered simplifying this? You need to Define what all of this is. Perhaps it is:

The person took funds as Shareholder Loan.

Then, they need to finish up the year and turn in the details as a personally owned vehicle having a Business Mileage log to get reimbursed at mileage rates under the terms of An Accountable Plan.

But, they won't get that money, because they already got some, to deal with their taking of funds earlier. This is the evidence of amounts to apply to the amount(s) taken, to show the loan is being repaid by them finally accounting for some value, properly, as an employee.

And from now on, they make their personal loan payments from personal funds and they submit to their employer under An Accountable Plan.

Or?

[palmasservices]

Thank you. Yes this is a big rig going out of state.  Unfortunately, he wasn't on payroll.  First year, and he did not have a clue or doesn't have a clue of how a Corporation ("S") works.  I truly appreciate your detail explanation.  Thankyou.

[qbteachmt]

It's not too late to "fix" 2019 and create payroll.