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Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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My boss is not an employee of our company as we are an LLC

Resolved Question:

My boss is not an employee of our company as we are an LLC and he is indirectly the sole owner with his wife. He has two homes in different states, spending winters at his tax home and summers at his second home. On occasion he will attend meetings while at his second home. He frequently travels back and forth between the two homes when he has meetings at his tax home. Are the travel costs considered a personal commute and therefore a personal expense or are they deductible as a business expense?
Submitted: 2 years ago.
Category: Finance
Expert:  Megan C replied 2 years ago.

Megan C :

Thank you for your question, and thanks for using JustAnswer.com

Megan C :

How are you today?

Customer:

Good. How are you?

Megan C :

Good

Megan C :

If he's going from his second home back to his office, or place of business, that is a commute and no expense will be deducted.

Megan C :

Here's a good discussion about the difference between commuting and travel: CLICK HERE

Customer:

Okay.

Megan C :

The only time it's travel is if you are going to a temporary work place that is outside your tax home

Customer:

He doesn't view it as commuting. I'm trying to convince him that it is. He thinks since he is doing business in both locations he should get the deduction.

Megan C :

For example, if a meeting was held at a convention center by the second home, the drive from the primary residence to the second home would be deductible if he was going there for a business purpose.

Megan C :

No, you only get the deduction if you are doing work at a temporary workplace away from your tax home.

Customer:

That is what I've tried to tell him. I will use what you sent to show him.

Megan C :

I know it's sort of a grey area, but you don't want to take commuting miles when they aren't deductible.

Customer:

He has also said his second home is an investment and he is going to check on it. Same answer...commuting?

Customer:

I agree!

Megan C :

Yes. That is commuting. It's his second home.

Megan C :

Good argument, but it wouldn't fly with the IRS

Megan C :

The investment has to be generating you income in order for you to even start deducting expenses.

Megan C :

So, if it was a rental property he would have rental income and could deduct the mileage.

Customer:

Okay. So he won't get a business deduction for excess mileage when he drives to his second home so he has a car to use for business meetings at his second home, correct?

Megan C :

That is correct

Customer:

Perfect. How do I treat it if he wants the company to pay these costs? Are these distributions to a partner?

Megan C :

They would be non deductible expenses. You would have a book-tax difference

Megan C :

You could treat as an owner draw

Customer:

We don't have draws; instead we have distributions.

Megan C :

But if they are non deductible expenses, he's essentially creating income for himself...which I don't know why he would be doing that

Customer:

Or would we issue him a 1099?

Customer:

Great question! He thinks he gets the deduction.

Megan C :

He does not get a deduction.

Megan C :

You would send him a 1099, yes

Customer:

Okay. Am I able to get a copy of this transcript to show him?

Megan C :

You can print it using the browser's print function

Customer:

Excellent! Thank you very much. I appreciate your help!

Megan C :

You're welcome. Before you leave, please rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

I will. Thanks again!

Megan C :

You're welcome

Megan C and 2 other Finance Specialists are ready to help you
Expert:  Megan C replied 2 years ago.
Thanks, Laura for your positive rating. Please come back and visit me any time you have a question that needs answered. It was a pleasure working with you today.