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,
Please advise. Thank you
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@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.
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.
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?
@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.
Got it. Thank you
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