Re: Single Person Sole Proprietorship Catch-22?

On Tue, 27 Mar 2007 13:36:28 -0400, "Paul Thomas, CPA"
<paulthomascpapc@xxxxxxxxxxxxx> wrote:

I certainly don't see it that way, and I've never heard of the IRS pressing
the issue of "a spin around the block" voiding the Section 179 election on a
vehicle purchased ~for~ the business.

You know it's a perfectly normal spin around the block. I know it's a
simple spin around the block. But what's to stop the IRS from playing
the "converted from personal use" card to squash a lucrative Section
179 deduction by claiming that you and the kids were really visiting
your Auntie Alice in the next town over? Legally speaking, what
evidence makes for the difference in an audit? That's why I asked
very specifically: What is necessary in terms of documents and/or
procedures for me to protect myself from the IRS playing the
"converted from personal use" card with vehicles and equipment? Should
I have kept a detailed mileage log of every use? I do have a detailed
business plan and a more general business log, but not a definitive,
ironclad record of every single mile driven. What evidence is
considered reasonable?

There was a guy in these groups earlier, who having bought a truck to plaw
snow, was waiting on the snow (late winter in the NE). I doubt the IRS
would claim that the delay in using the vehicle to plow snow would prohibit
any 179 election. The truck was ~available~ to be used, and therefore would
otherwise qualify for Section 179.

That's a completely different question (perhaps one of timing only but
not a question of "conversion from personal use" risk) unless, of
course, the guy lived in Alaska, had a 1,500 ft driveway and needed a
plow truck exclusively for his own personal use.

They'll look at the timing of the purchase and the use of the asset. With
exceptions for timing that spans two tax years, the rest is moot in most
cases. Even when equipment is purchased for a new start-up business, some
times months in advance of an actual start date, Section 179 is available on
the qualifying assets.

I was definitely burned on my last major business purchase in
December. My (tax law) ignorance entirely. I'll certainly make sure
that never happens again.

What they'll frown on is the computer bought in 2005, that was placed in
service in a new business in 2007. There's most likely personal use or
other disqualifications for Section 179. More so on assets that lend
themselves to personal use. Computers, cell phones, digital cameras, GPS
devices, TV's, etc.

My big problem is that most, if not all, of the equipment I use in my
landscaping business is the same kind of stuff that most people would
buy and use to tend to their own lawn and property needs: lawnmowers,
trimmers, lawn blowers/vacs, chainsaws, shears, clippers, etc. Even
my pickup truck and trailer are really no different than ordinary
people might drive to work or to the dump on any day of the week. Only
my Bobcat skidsteer and its attachments might look a little out of
place in the typical suburban homeowner's garage.

Sorry, but I still get the impression that this is an ugly potential
Catch-22 situation for any one-person, sole proprietorship business
that the IRS decides to audit. Anything that you or anyone else can
tell me about how to protect myself in this regard against an ugly
first year audit would be very much appreciated. A war story
(successful or unsuccessful) on a challenged Section 179 deduction
might be even better if there is one out there to tell!

Thanks,
Don P.
.

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