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avvv28
Level 2

Can I use two cars for business deduction. One car by standard deduction and other by regular?

I am self-employed, my wife is a w2. I have a honda civic 2003 that I use for my business. My wife has an Infinity G37 that she uses for herself. I deduct my business mileage on Honda Civic by standard deduction method. My question is,

  • Can I purchase my wife's car in the last week of December, use that car only for my work purposes?
  • Can I put both cars as business vehicles, deduct Honda civic expenses by standard deduction and Infinity's(which I am putting in use in last week of December) by the regular method and take advantage of the bonus depreciation?

Please advise. Thank you

1 Best answer

Accepted Solutions
tagteam
Level 15

Can I use two cars for business deduction. One car by standard deduction and other by regular?


@avvv28 wrote:

Would it work?


It will not work if you get caught. The transaction would be considered a sham transaction by the IRS; it lacks economic substance. 

 

Per Section 7701(o), transactions are treated as having economic substance only if they change in a meaningful way (apart from federal income tax effects) the taxpayer's economic position, and the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into the transaction.

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4 Replies
Critter
Level 15

Can I use two cars for business deduction. One car by standard deduction and other by regular?

Of course you can use 2 vehicles in your business at the same time and for each vehicle you have the choice to use either the Actual Expenses or the Standard deduction method ... both do not need to be the same. 

 

And you do not need to "buy" the car from your wife ... simply convert it to business use.   Since you are not buying a new vehicle you cannot take the bonus depreciation (buying from family doesn't count) so your idea is flawed.  

avvv28
Level 2

Can I use two cars for business deduction. One car by standard deduction and other by regular?

Thank you, Critter. I appreciated the advice. What if my wife sells her car to a friend and I buy back from the friend?

 

Would it work?

tagteam
Level 15

Can I use two cars for business deduction. One car by standard deduction and other by regular?


@avvv28 wrote:

Would it work?


It will not work if you get caught. The transaction would be considered a sham transaction by the IRS; it lacks economic substance. 

 

Per Section 7701(o), transactions are treated as having economic substance only if they change in a meaningful way (apart from federal income tax effects) the taxpayer's economic position, and the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into the transaction.

View solution in original post

avvv28
Level 2

Can I use two cars for business deduction. One car by standard deduction and other by regular?

Got it. Thank you 

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