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I live in Virginia, but have a real estate holding company

I live in Virginia, but...

I live in Virginia, but have a real estate holding company (single member LLC) in South Carolina. This year I am expecting Net Profits to be around 15k. As I travel to SC a lot, I am thinking of buying a 6000 pound SUV to qualify for Section 179 Tax deduction. I have the following questions 1) As my profits are going to be just 15k, if I apply the 25k deduction, I will end up in a 10k loss, is this allowed? 2)Where do I register this car, SC or VA?

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Answered in 46 minutes by:
9/20/2013
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4,775
Experience: 35 years tax experience, including four years at a Big 4 firm.
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PDtax :

Welcome to the site. I'm PDtax, and will be helping you today.

PDtax :

The 179 deduction is allowed in excess of your activity, and can be applied against other income, such as wages, from other sources. It is allowed.

PDtax :

Since the SUV has to be a business asset, and the business is in SC, register it there, and pay insurance at the SC address.

PDtax :

Thanks for asking at Just Answer. If you have follow up questions, please ask. If this covers your questions, positive feedback closes out your question. I'm PDtax.

Customer:

So when I file my taxes for 2013, The 179 deduction will be on my 1040 Schedule A not in schedule C?

Customer:

So when I file my taxes for 2013, The 179 deduction will be on my 1040 Schedule A not in schedule C?

Customer:

So when I file my taxes for 2013, The 179 deduction will be on my 1040 Schedule A not in schedule C? I am just curious, I am buying this for my business activity, How can I deduct it against my personal or other income? Just want to make sure I understand it correctly. Thanks for all your help.

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Customer: So when I file my taxes for 2013, The 179 deduction will be on my 1040 Schedule A not in schedule C? No, Section 179 is reported on your Schedule C for the LLC.

Customer: So when I file my taxes for 2013, The 179 deduction will be on my 1040 Schedule A not in schedule C? I am just curious, I am buying this for my business activity, How can I deduct it against my personal or other income? Just want to make sure I understand it correctly. Thanks for all your help.

Since you have a Section 179 claim that can exceed the income from that active conduct of a trade or business, you have some choices. One, claim just enough 179 and regular depreciation to zero out your income from the LLC. Two, Section 179 expense all of it, and create a loss.

The loss, as another Expert reminded me to expand on, could be used to offset income from any other active trades or businesses (§ 1.179-2(c)(6), link at: http://www.law.cornell.edu/cfr/text/26/1.179-2). Wages count as active conduct of a trade or business income for this purpose.

So, if your tax return includes wages or other active conduct income, claim all the 179 you want from your LLC and use the excess to offset the wages. Without such income, or another business with income to report, the excess 179 will not be deductible until next year.

Thanks again from Just Answer, and thanks to the other Expert for his assist. I'm PDtax.
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4,775
Experience: 35 years tax experience, including four years at a Big 4 firm.
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Customer reply replied 4 years ago

One final Question, I know you suggested registering the vehicle in SC as the company was registered in SC, Will there be any issues if I register the car in VA and claim 179 deduction?

It just seems inconsistent. If you are doing real estate business in South Carolina, what business purpose would you have for VA registration?

Register the SUV in SC, tell your insurance agent it will be in VA, and have enough business records to support the business use in your SC real estate endeavors.

Thanks again from Just Answer. Positive feedback closes out your question. I'm PDtax.
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PDtax
PDtax
PDtax, Certified Public Accountant (CPA)
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