ACS41 Posted October 8, 2008 Report Share Posted October 8, 2008 Graphic Designer/Artist client plans to buy a motorcycle for $8,000. Furthermore, he plans to do a high end paint job ($3,000) to the motorcycle that will display his logos. The motorcycle will displayed prominently at his place of business and home as well as on his website. He will not ride the motorcycle very much. Can this purchase be treated to any extent as a marketing expense versus automobile expense? Quote Link to comment Share on other sites More sharing options...
jainen Posted October 8, 2008 Report Share Posted October 8, 2008 >>He will not ride the motorcycle very much.<< One has to be a little skeptical of such a claim. Anyway, it's kind of expensive for a shop display. The rule is a business expense can't be extravagant, which means it has to be proportional to the income he can realistically hope it will generate. That's what you need to ask about. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted October 8, 2008 Report Share Posted October 8, 2008 You do need to be skeptical. That being said, 8K is not a lot for a bike, seeing as an entry level Harley will run at least 12-15K. IF the tp was only going to take it to shows where he was generating business and leaving it in the showroom of his business as a display, I MIGHT do some extra research to find out if there is a case or ruling that supports the deduction. IF it turns out that this could be a legitimate business expense, I would document every single dollar of revenue that the display (never call it a motorcycle again) generated, and I would definately never ever ever see a single personal mile on the bike. Be very skeptical. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
ACS41 Posted October 8, 2008 Author Report Share Posted October 8, 2008 You do need to be skeptical. That being said, 8K is not a lot for a bike, seeing as an entry level Harley will run at least 12-15K. IF the tp was only going to take it to shows where he was generating business and leaving it in the showroom of his business as a display, I MIGHT do some extra research to find out if there is a case or ruling that supports the deduction. IF it turns out that this could be a legitimate business expense, I would document every single dollar of revenue that the display (never call it a motorcycle again) generated, and I would definately never ever ever see a single personal mile on the bike. Be very skeptical. Tom Lodi, CA Actually the "unit" is around $45K. The seller badly needs cash. Sometimes it is hard to quantify reveune from promotion. The unit is meant to show his significant talents to a potential customer. He does own a car so he is not buying the unit for his transportation. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted October 8, 2008 Report Share Posted October 8, 2008 I would say the minute he drives it for any purpose other than to take it from his business to a show and back, he is in danger on audit. If it is that classy of a bike, any auditor worth his salt is going to call it personal and make you prove it in front of a judge. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
jainen Posted October 8, 2008 Report Share Posted October 8, 2008 >>The unit is meant to show his significant talents to a potential customer.<< I have no problem with the paint job itself (production costs only, not the market value). But it is well established that putting advertising on a vehicle does not make the vehicle a business asset. There should be NO mileage whatsoever on such a bike--it should be transported to shows on a trailer because obviously he wouldn't risk fine art to the dings and fading of normal commute traffic. When I say extravagant, I mean it is going to take at least four similar jobs just to break even, so he'd better be looking at gross revenues of a couple hundred thousand. That's only possible if he has several employees. That's the business reality, but of course he is an artist first. So deduct the paint (or leave as COGS) and tell him to have fun with his toy. Quote Link to comment Share on other sites More sharing options...
ACS41 Posted October 9, 2008 Author Report Share Posted October 9, 2008 >>The unit is meant to show his significant talents to a potential customer.<< I have no problem with the paint job itself (production costs only, not the market value). But it is well established that putting advertising on a vehicle does not make the vehicle a business asset. There should be NO mileage whatsoever on such a bike--it should be transported to shows on a trailer because obviously he wouldn't risk fine art to the dings and fading of normal commute traffic. When I say extravagant, I mean it is going to take at least four similar jobs just to break even, so he'd better be looking at gross revenues of a couple hundred thousand. That's only possible if he has several employees. That's the business reality, but of course he is an artist first. So deduct the paint (or leave as COGS) and tell him to have fun with his toy. Thank you for your help. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted October 9, 2008 Report Share Posted October 9, 2008 Is it usual and necessary? Does he paint motorcycles himself for a living? Maybe the cost of the paint job. Not FMV of paint job. Or, does he design/paint other things so someone else is going to paint the motorcycle to his specs? Then, maybe the additional cost of his logos being included in the paint job. I think the word "skeptical" is exactly right. Quote Link to comment Share on other sites More sharing options...
michaelmars Posted October 10, 2008 Report Share Posted October 10, 2008 i have clients that buy/sell ferrari cars, he has some just for trade shows to promote his business, i have no problem deducting those as promotion, he does usually trailer them but thats because they are not road authorized vehicles. but he does take them to tracks to show off [customers] the reacing ability of a ferrari Quote Link to comment Share on other sites More sharing options...
jainen Posted October 10, 2008 Report Share Posted October 10, 2008 >>to show off [customers] the racing ability of a Ferrari<< Obviously, because otherwise his customers wouldn't know about such an obscure vehicle! It's normal for a car dealer to splash his name around places where cars are needed. But actually racing is a whole 'nother activity. If he is trying to deduct racing as a sales expense, he'd better have extraordinary records. As his tax advisor, you owe him some serious research because there are a number of rulings on similar schemes. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted October 10, 2008 Report Share Posted October 10, 2008 i have clients that buy/sell ferrari cars, he has some just for trade shows to promote his business, i have no problem deducting those as promotion, he does usually trailer them but thats because they are not road authorized vehicles. but he does take them to tracks to show off [customers] the reacing ability of a ferrari If you ever decide to retire, please refer that client to me. I will be happy to take some racing time in a Ferrari in exchange for some tax prep work. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
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