Tax Court Denies RV Business Deductions

[Crespro]

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).

Crespro

[DanTheRVMan]

rgatijnet1 wrote:
When it comes to business tax deductions....just don't get greedy. IN this case, the person tried to deduct more than he paid for the coach and his gross receipts seemed to indicate that the possibility of making a profit were slim to none. You don't spend a quarter million on an RV with the hopes of getting back $14K in insurance sales.
Obviously people start a business with some expectation of making a profit, but in this case the amount earned was so far away from the expenses claimed that I am sure that the courts saw this for what it was.

Sounds like it was not legitimate.

[Crespro]

I think the best Sec. 280A argument is to have less than 14 days of personal use, especially the first year when you take the expensing deduction. You will need to show that business use is similar to travel expenses in a hotel, and the fact that you are living in the motorhome is no more personal use than the benefits of a hotel.

[rgatijnet1]

When it comes to business tax deductions....just don't get greedy. IN this case, the person tried to deduct more than he paid for the coach and his gross receipts seemed to indicate that the possibility of making a profit were slim to none. You don't spend a quarter million on an RV with the hopes of getting back $14K in insurance sales.
Obviously people start a business with some expectation of making a profit, but in this case the amount earned was so far away from the expenses claimed that I am sure that the courts saw this for what it was.

[bsinmich]

Even though 25% of the square footage in my previous home was for my insurance office I did not deduct it because I knew I was going to make a huge profit when I sold the house and that would have made it a taxable gain. $15,900 in 1976 vs $180,000 in 2001. If we hadn't been in a recession it would have been a lot more.

[Executive45]

IF you READ the OP's post...he didn't say it applied across the board, he simply suggested you SHARE it with YOUR CPA if you're taking the deduction.......:W.....Dennis

[bshpilot]

id be happy with 66% write off.

[Crespro]

The taxpayers’ problems – like many tax cases, the taxpayers caused a major part of their problems.

1. Depreciation – based upon $302,119 while they paid $248,456.96 and did not justify the higher number.
2. Business use in 2006 – claimed 100% without records. Admitted at trial that there was some personal use.
3. Business use in 2007 – claimed 99.95%. There were records, but the Tax Court determined that the actual business use was 66.7%.

If the IRS or Tax Court catches you making false statements (or even unsupported claims), you are in trouble. Their attorney claimed that Sec. 280A was not applicable, but when you are in the wrong the Tax Court may insist on a “letter of the law” interpretation.

If anyone has a good argument on the Sec. 280A issue, that would be helpful to RV.net readers.

[Francesca_Knowl]

old guy wrote:
so does that mean the country singers can't deduct their fuel and other costs when touring America??

No.

[old_guy]

so does that mean the country singers can't deduct their fuel and other costs when touring America??

[Twomed]

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

[Canadian_Rainbi]

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.

[Daveinet]

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.

[rgatijnet1]

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.

[wnytaxman]

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.