S corp owner has a gift car that he lets the s corp use. Can the S corp then reimburse that to the owner/employee and take a deduction?

[Golfer2016]

This is for a S corp in which the owner is the employee.  

The owner/employee has a $20 gift card/coupon to a store.  The S. Corp is going to incur a business expense at that same store for an item that would be 100% deductible.  If during check out, the tax payer uses that gift card, could then the S. Corp reimburse the owner for that $20?  By doing so, the S corp gets the full deduction.   So if the expense was $100, the S corp pays $80 at the store, and reimburses $20 to the owner/employee, and writes off the full $100.

My opinion that is fine as that is almost like the $20 was just cash the owner used to which would have been reimbursable to the corporation.

Thanks!

[TaxGuyBill]

A Gift Card is treated the same as cash.  So yes, that is correct.

However, you said "gift card/coupon".   Where did you come up with the word "coupon"?  A "coupon" (discount) may be treated differently.

[Golfer2016]

It was a $20 off voucher that could b eused for something else.  

I agree, that if it was like "spend $200 and get $20 off", that would have been a discount and not a coupon so it wouldn't apply I think?

[rbynaker]

Interesting situation.  What is the owner's tax basis in the voucher?

[qbteachmt]

You don't get to write off something you didn't incur. If you buy something that is $100 for $80, all you incurred is $80. The "owner" giving it as cash or a coupon or a gift card, didn't "give" them $100. It is $80 value for $80 spent.

The owner seems to want to make the difference as payable to him/her, but there was no difference.

Let's try it like this: The Owner pays for something for business and turns in the receipt and the something. They get reimbursed under an accountable plan. That is repaid at the cost of what got spent; not some higher value it could have sold for, and not the difference.

[Golfer2016]

The owner says since they used the gift card that is like cash, they could be reimbursed (which is subject to the accountable plan).

Why don't you feel like this is allowed?

The business ultimately writes off the full $100, but mechanically the $80 went to the vendor and $20 was reimbursed under the plan

[Golfer2016]

Essentially, the S corp is buying the gift card from the owner for $20.

[TaxGuyBill]

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@rbynaker wrote:

Interesting situation.  What is the owner's tax basis in the voucher?

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I agree with Rick.  This is the key point.

Did the owner (or somebody else) pay for this?  Or was it won as a prize and tax paid on it?  If so, it as Basis and is just like cash.

Or was it a free 'coupon'/voucher that has no Basis?  If that is the case, it is just a discount, and $80 is the deduction.

[qbteachmt]

This reminds me of a scenario I used to get often in class:

I bought a used construction trailer worth $50,000. I only paid $35,000 for it. Why can't I enter it as my $50,000 asset? Answer: you didn't pay $50,000 for it. If it really was worth that, why didn't you Pay That?

The owner cannot bring a physical thing they just bought for $80 to the office and get reimbursed for $100. It's the same concept.

We are not making change here. We bought something at a cost, not what it Could have cost or Would have cost. The coupon is not worth $100. It's clearly worth $80 of value. Or, if that is 20% discount, then it's value is 80% of whatever they buy, the same as shopping on the Sales Day.

I just love how people intend to leverage anything that occurs to them.

If the owner wants to be reimbursed $100, let them buy something for $100.

[qbteachmt]

Yes, of course basis matters. It seems the owner wants to Sell their coupon for a higher value.

[Golfer2016]

I think it was a promotional item.  So, the only way he could say he "paid" for it, is that it was ingrained in a higher sales price.

[Golfer2016]

Yes, but if in the gift card scenario, the gift card could be seen as cash.  So it is like cash is put in the corporation, or the corporation bought the gift card from him.  

Technically, the individual would need to pay tax on the income but I'm sure he wouldn't

[qbteachmt]

"the gift card could be seen as cash."

Which are often sold at a discount. I get a card with $100 value and I sell it to you discounted, so I get cash, and you get a bargain next time you shop. They are traded on the web all the time. You don't get to write off Worth. You write off Actual.

We still haven't learn how the card came to be.