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Crespro

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Posted: 08/08/14 11:29am Link  |  Quote  |  Print  |  Notify Moderator

Hello RV.net Friends,

If you are taking business deductions for RV use, you should share this case with your CPA.

Tax Court Case Dellward R. Jackson et ux. v. Commissioner; T.C. Memo. 2014-160; No. 2513-11

The Tax Court held that IRC Sec. 280A prohibits RV deductions even for business use because the RV is a residence and no part is used exclusively as a home office.

The taxpayer sold insurance policies at recreational vehicle (RV) rallies. The IRS disallowed depreciation and interest deductions that Ps claimed as business expenses and determined accuracy-related penalties under I.R.C. sec. 6662(a).

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rgatijnet1

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Posted: 08/08/14 11:33am Link  |  Quote  |  Print  |  Notify Moderator

That makes sense for this case but that does not mean that ALL business deductions involving RV's will be denied. Each case is different.

bshpilot

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Posted: 08/08/14 11:36am Link  |  Quote  |  Print  |  Notify Moderator

if the RV is NOT a "residence" - rather its an OFFICE, BILL BOARD & MARKETING Expense i don't see why it wouldnt be a deductible business expense.


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Effy

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Posted: 08/08/14 11:37am Link  |  Quote  |  Print  |  Notify Moderator

Right, this is a pretty isolated case. We take deductions for our RV rental business as the RV's themselves are business property and are considered a business vehicle and experience depreciation as a result of that business. We do not take deductions for our personal MH. I mean that just makes sense.

I wonder if this guy would have bought the RV under his business for that purpose if he could have claimed it. Sounds like he used his personal RV and really never tied it to his job.

If I take my personal MH on business trips I can claim mileage, but I can't claim depreciation.


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Francesca Knowles

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Posted: 08/08/14 11:45am Link  |  Quote  |  Print  |  Notify Moderator

Thread title is in my opinion too broad. As noted above the ruling has very narrow applicability- no effect whatever on MOST deductions related to true business use of an RV.

And btw exactly the same rule applies to using any residential arrangement- in order for it to be deductible the business-related space must be physically separate from the living area and dedicated solely for business use.


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Posted: 08/08/14 11:45am Link  |  Quote  |  Print  |  Notify Moderator

That case has been around for quite a while and it is more of an isolated case. My own take on it is that they used the wrong defense for the deduction. The "home office" deduction is pretty strict in its interpretation. I would have approached the deduction in a different method by looking at the use of the RV as both business transportation and meeting area for clients/customers.

Any time you approach an aggressive deduction you run the risk of having an over zealous auditor give you grief and then being faced with having a judge make the determination of the validity of your deduction. You have to make sure you have your ducks in a row when going after an RV business deduction. Remember the burden of proof is on the taxpayer, not the government.


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rgatijnet1

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Posted: 08/08/14 11:48am Link  |  Quote  |  Print  |  Notify Moderator

Effy wrote:



If I take my personal MH on business trips I can claim mileage, but I can't claim depreciation.


Exactly right. I trade stocks and use my RV to travel around the country to check out businesses before I buy their stock. I've been through two IRS audits with no problems whatsoever. Sort of like John Madden using his motor home to travel to football games because he refused to fly. His mileage was deductible, as well as some of his other expenses.

Daveinet

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Posted: 08/08/14 12:04pm Link  |  Quote  |  Print  |  Notify Moderator

Its actually worth reading the report. It gives a pretty good impression of how we are perceived by Congress as it relates to the IRS. If you read the explanations, you would be surprised by the ruling, particularly where they evaluate any personal use of the RV negating business purpose. What the law really fails to do is to be consistent with how business is conducted. The interpretation of the law does not demonstrate consistency with what one would do in a hotel, when they are on business. It is assumed that if one watches TV, that constitutes personal use for a whole day. Typically if one stays in a hotel, they would watch TV in the hotel, yet that is not considered personal use of the hotel. It also does not seem that inconsistency was argued.


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Canadian Rainbirds

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Posted: 08/08/14 12:58pm Link  |  Quote  |  Print  |  Notify Moderator

Many years ago, a friend who was a Forrester with his own consulting business on the West Coast bought a float plane in order to easier access remote areas. His accountant warned him:n "You will be audited!"

That tax year he included a note with his return: "Dear Tax Man, I understand that I will probably be audited because of the purchase of the aircraft. I thought that you might want to wait a year because next year I am buying a 100 foot boat to use a floating base camp. You could save time and money by doing them both together".

With a refund check "was a hand written note: "See you next year, The Tax Man"

Thanks to scrupulous record keeping the audit went fine.

Twomed

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Posted: 08/08/14 02:01pm Link  |  Quote  |  Print  |  Notify Moderator

Simplified office rules make this kind of moot. You can take reasonable space allowance per the new (last year) Sched C rules. Always leave a little on the table...makes the audit easier and usually in your favor. JMHO


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