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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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If Im the sole proprietor of an LLC whose business is "transportation",

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If I'm the sole proprietor of an LLC whose business is "transportation", can I claim a 100% vehicle deduction if my entire business's purpose is to transport myself? Background: I'm planning on transferring my only vehicle to my LLC. I can't claim that I'm commuting to or from my "known place of business" since that's set to a 3rd party registered agent.

Lev :

Hi and welcome to our site!
Regardless if the vehicle is owned by you personally or by the LLC - business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business is operated to make a profit.
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.


The IRS provided following illustration when transportation expenses are deductible


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So - considering your information you may deduct your transportation expenses if travels are business related. If all 100% of your travels are business related - you may deduct 100% of your transportation costs. If however - the vehicle is used for both personal and business purposes - costs must be prorated - and only business part of costs could be deducted.

Lev :

Specifically commuting between your home and work are considered personal travels. However if you are travel between two business locations - that are business related travels. If you have a home office - than your home would be considered a place of business - and travels between your home-office and another place of work would be business related travel.

Customer:

Does "home office" mean that it has to be the "known place of business" address for my LLC? And would travel from my home office to my regular employer that has no relationship with my LLC still qualify as business related travel?

Lev :

Does "home office" mean that it has to be the "known place of business" address for my LLC?
The "home office" for these purposes means - you allowed to deduct home office expenses. The legal address of the LLC and the fact of having the LLC - are irrelevant.


You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.


If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus:


--Your business use must be for the convenience of your employer, and
--You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.


If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.

Customer:

Thanks for the reply. It sounds like a deduction for vehicle use wouldn't go over too well with the IRS, especially since my LLC wouldn't have any other "business" aside from providing a tax deduction for myself (which sounds like textbook tax evasion).

Lev :

Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business is operated to make a profit.
If the purpose of the activity is NOT to make a profit - such activity woudl not be classified as "business."

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