Vehicle Expenses

[Janitor Bob]

Client has a full-time job....but also invested in and is active in a poultry farm partnership on the side. She retained all of her gas receipts and vehicle expenses for traveling to and from this poultry farm. Can she deduct these expenses in any way.

The partnership (K-1) had a loss for the year.

Also....She has a van that she gave to the poultry farm partnership for business use....but it is still in her name. Can she deduct any of those vehicle maintenance expenses (yes, she kept receipts) or are those expenses for the partnership.

Would all of these (if they can be used, simply Sch A expenses) or reported some other place?

I will do my own research, but want to see opinions from the smart people here on the board.

best answer gets a frikkin banana sticker on their paper!

[Terry D EA]

Client has a full-time job....but also invested in and is active in a poultry farm partnership on the side. She retained all of her gas receipts and vehicle expenses for traveling to and from this poultry farm. Can she deduct these expenses in any way.

The partnership (K-1) had a loss for the year.

Also....She has a van that she gave to the poultry farm partnership for business use....but it is still in her name. Can she deduct any of those vehicle maintenance expenses (yes, she kept receipts) or are those expenses for the partnership.

Would all of these (if they can be used, simply Sch A expenses) or reported some other place?

I will do my own research, but want to see opinions from the smart people here on the board.

best answer gets a frikkin banana sticker on their paper!

JB Here is my opinion for what it is worth.

1. The trips to and from the poultry farm may very well be a commute and not deductible unless the commute would be recognized as from her home to her first job and from the poultry farm to home. Mileage in between would be deductible.

2. The donated van would become a part of her investment in the partnership and would increase her capital account in the partnership. The partnership now owns the van and can deduct the maintenance expenses related to it. she cannot deduct them on her personal return unless she paid for them and did not get reimbursed. If that is the case then form 2106 if she is an employee of the partnership.

3. If she is on the payroll for the partnership then the vehicle expenses (mileage), would be deducted on form 2106 and Sch A as an unreimbursed employee expense. Otherwise they may be deductible on the K-1.

I hope this helps in some way.

Terry D.

[kcjenkins]

The mileage should be deductible as UPE, in my opinion. And since she still owns the van, as I understood it, and still paying the expenses on it, it too would be UPE. She might be smart to transfer ownership to the partnership to increase her basis, and also to let the partnership take over expenses on the van, if it is being used totally for that business.

[Janitor Bob]

JB Here is my opinion for what it is worth.

1. The trips to and from the poultry farm may very well be a commute and not deductible unless the commute would be recognized as from her home to her first job and from the poultry farm to home. Mileage in between would be deductible.

2. The donated van would become a part of her investment in the partnership and would increase her capital account in the partnership. The partnership now owns the van and can deduct the maintenance expenses related to it. she cannot deduct them on her personal return unless she paid for them and did not get reimbursed. If that is the case then form 2106 if she is an employee of the partnership.

3. If she is on the payroll for the partnership then the vehicle expenses (mileage), would be deducted on form 2106 and Sch A as an unreimbursed employee expense. Otherwise they may be deductible on the K-1.

I hope this helps in some way.

Terry D.

The gas receipts are for trip from home to poultry farm...Did not think this would be deductible.

She states that she did give the van to the partnership, but as of end of 2008, it was still titled in her name...just being used by the partnership...she paid for some various maintenance on the van in 2008 and was not reimbursed.

I understand and agree that for 2009 (assuming van title transferred to partnership) that the FMV of the vehicle should be added to her partnership capital account

She is not an employee...Just a 40% partner...receiving 40% of the loss on her K-1 (-4663)

Currently the K-1 has nothing in her capital account....Just a decrease of -$4663 (her share of the loss). Next Year, (assuming the van title transfers to the partnership) I would expect to see an increase in her capital account equal to the van's FMV....correct?

If client invested money into the partnership in 2008...should there not be an amount for capital contributed during the year?

...But if title of the van never tranfers....and she keeps paying for expenses and letting the partnership use the van....where do her expenses go? Should they be reimbursed by partnership (so that in the end they appear on partnership's 1065 as an expense). Or appear on her Sch A as unreimbursed employee expense (even though she is not an employee of the partnership)?

Man...This is a confusing one!

[MontanaEA]

But the unreimbursed partnership expenses are only deductible if it says they are in the partnership agreement.

[Janitor Bob]

But the unreimbursed partnership expenses are only deductible if it says they are in the partnership agreement.

Where would Unreimbursed partnership expenses show up?...not sure where to put them?

[Janitor Bob]

Where would Unreimbursed partnership expenses show up?...not sure where to put them?

The 1065 (I did not prepare) does not have any info in the M-2 area (Analysis of Partner's Capital Accounts)....and thus no such info on either partner's K-1.....If client invested money in 2008, should there not be an amount on both the 1065 and the K-1 to show that in her capital account?

The only thing listed in this area on the 1065 is the partnership loss of $11,657 and a balance at end of year of -$11,657. The client's K-1 shows only this same thing...just her 40% share of the loss (-$4663) as her ending capital account

[joanmcq]

she needs to keep track of basis. its easy in ATX if you do the p'ship return, but that info is not always included w/the K-1. UPE are a deduction on the Sch E pg 2. She should have that the van expenses if paid by her are UPE in the partnership agreement.

[Bart]

....If client invested money in 2008, should there not be an amount on both the 1065 and the K-1 to show that in her capital account?

I would have thought that there would be an amount on both the 1065 and the K-1 to increase her basis for money contributed.

[Janitor Bob]

I would have thought that there would be an amount on both the 1065 and the K-1 to increase her basis for money contributed.

There probably should be...In talking to the client, I get the impression that the person doing the books for the partnership is not very good. In fact the partnership asked me If I would do their book next year so they could fire their current person (I declined, but told them I could do their 1065 next year).

I also know the guy who did their 1065 and sent the K-1s....He is OK, but would probably not question any missing info...he is just a no-questions asked, input the numbers guy who runs on a quantity-based assembly line method of preparing taxes.