Subject:  A question
Date:  Thu, 12 Dec 2002
From:  Paul

Michael,

I am a CPA and a member of the San Jose Chapter of the Cal Society of CPAs.

I have a client with a C Corporation who has a vehicle with is registered in his name. The corporation makes all the payments on the loan and he treats it as a corporate asset.

Is this a potential problem in an audit? Do you have any experience with this situation in an audit?

Thank you in anticipation.
Paul

Answer

Date:  Fri, 03 Jan 2003

Hello Paul,

Yes. Anytime you have a vehicle used for business purposes, there is a potential audit issue. Since the title for the car was taken personally, payments on the loan could be found to be compensation or dividends, and the depreciation may be disallowed for the car. The vehicle use can be reimbursed as an employee business expense. I suggest that your client and you get together with a tax attorney and clean this situation up.

Good luck!
Mike Gray

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