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CEO, CPA
CEO, CPA , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 174
Experience:  10 + Years of experience
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i own a publishing company, and I have an RV advertiser who

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i own a publishing company, and I have an RV advertiser who wants to donate a RV to the company to use and display and promote their brand when we travel doing business as the magazine. We are debating if it would be best to: (1) do a bill of sale, I pay the taxes and license but no charge for the RV or (2) can they 'gift' this to me to get a better tax deduction from their end as advertising. I prefer the GIFT - what is the difference and benefit?
Submitted: 5 years ago.
Category: Finance
Expert:  CEO, CPA replied 5 years ago.

CEO, CPA :

Hi, my name isXXXXX The one thing you may want to consider is not calling it a gift. Gifts are not tax deductible to the donating party and not income to the recipient. The IRS treats gifts as if they didn't happen, unless they meet certain thresholds and then they become a reporting item only. There are some taxes on gifts if they become large but it shouldn't impact this conversation. If you are looking for the best tax deduction between the two parties, consider who is in the top tax bracket. Whoever has the highest tax bracket will receive the best benefit for the expenses. Please do not hesitate to respond if you have any questions. Chad Oberg, CPA

CEO, CPA :

By the way, did you write a book or are you the publisher or both. Just wandering, my wife wrote her first book and we self published this last April. Tough gig.

Customer:

I'm a little confused .. what you would suggest it be called? The RV Company is definitely the higher $$ .... I am trying to get a sense of how to structure this so that we both benefit. I imagine they wil lget the same deduction whether they "sell" it to me in trade for advertising or if they 'donate" it to the magazine in exchange for promoting?

Customer:

I actually publish a monthly magazine for horse people

Customer:

33 years ... tough times now for sure, that is why I want to do this thing the best way

CEO, CPA :

Do you have taxable income at your company?

Customer:

S Corporation ...

CEO, CPA :

What is taxable income at your individual return, since you have a S-corporation? Do you know which tax bracket you are in? Nevertheless, it really depends on many factors. If the donating company takes a deduction, either way, the IRS would anticipate that your company would pick-up the donation as income for the benefit received of which you would be able to offset your company expenses. If your not in a high tax bracket, the impact is minor. Many times this falls through the cracks because it gets a bit confusing.

Customer:

ok ... so last question is how/where would it be declared on my return? better personal or corp since the magazine is trading advertising for the product? thanks

CEO, CPA :

It is very similar to having a sponsor in the racing business. The sponsor's donations are income to the recipient.

CEO, CPA :

I would keep the transaction at the S-corporation and it will pass through the K-1 to your individual return.

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