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I have a partnership where the two partners are using their…

I have a partnership...

I have a partnership where the two partners are using their personal cars for the business. I'm thinking I should not deduct mileage on the partnership return. I should use the actual expenses. Can I put the standard mileage on their personal returns?

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Answered in 33 minutes by:
3/13/2018
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
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Experience: 35 years tax experience, including four years at a Big 4 firm.
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Customer reply replied 1 month ago
Ok

You can't use the actual expenses, which would include depreciation, on the 1065. You could report the cash out of pocket, but personal insurance, taxes, and other costs are borne by the employee/partner. Doling this would require 2106 reporting of the net expenses, and reporting the reimbursement personally.

Under an accountable plan, (IRS term), you could report the mileage amount as a partnership deduction, and the partners do not have to report the amount paid or go through the math for 2106 reporting. It also means the payments are tax free to the partners, and deductible at the partnership level.

Fringe benefits like actual reimbursement are reported as K-1 items, akin to guaranteed payments. It is possible that the deduction for the auto expenses would be taxable, and no available deductions (lost to the 2% rule). Consider doing all the math before making this choice.

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Customer reply replied 1 month ago
Thank you. Taking the mileage on the 1065 makes the most sense.

Then please rate my response (five stars is best) to complete your request. I'm PDtax.

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