My husband owns a custom auto shop where he builds rock crawlers and other off-road vehicles. Last year he started building a rock crawler for his business and is documenting the process because the story and finished vehicle will be featured on the cover of a prominent off-road magazine. Can he deduct the cost of building the vehicle as an advertising expense because the building of the vehicle is being used to attract customers?
Once the vehicle is completed and running, he will add it to the fleet and deduct the expense as a vehicle used for business purposes. But until it is running, it doesn't seem like it would fit into the business vehicle category because it is not in service yet.
You would not deduct as an advertising expense, but you could deduct the supplies as you incur the expense- the only caveat if you do this, you would have to adjust the basis of the completed vehicle when you place it into service and start depreciating it because you built it. (So if the value when you place it in service is $25000 but you deduct $10000 in supplies now, you would want to use $15000 as the basis when you start depreciating.)
Thank you! That makes sense.
I’m assuming I’d deduct the parts as supplies under the business.