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Employee business expense-lease of mercedes

Taxpayer is ad sales woman for local radio station and uses car 75% for business. She leases a mercedes worth $80k paying $40k in 06 for a two year lease after which she can buy mercedes for $40k or walk away. How much of the $40k lease payment is deductible on 2106 in 2006?....in 2007? Mike

ps-she's 28 and took a $60k distribution from her IRA to help pay the $40k...brilliant, right:-)

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Reply to
James Lewis
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the lease started on Jan 01, 2006, she has $20,000 plusgas and expenses as a starting point. Say the total is$24000. If she documents 75% for business, that's $18,000. Even then, the amount deductible through the 2106 is only what exceeds 2% of her AGI, which I hope is high if she's spending that much on a car. So assuming $100,000 AGI, about $16,000 flows on to schedule A. Had she left this money in the IRA, and it compounded at

10%/yr, she'd have had $1.5 million dollars, with no further deposits. Of course, it would likely 'only' be worth $750K after inflation. What a shame. JOE
Reply to
joetaxpayer

Now why do I smell the AMT kicking in?

Seriously though, one year's lease payment at a time I think. ChEAr$$$$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

Leased cars have to adjust their auto lease deduction by the lease inclusion table amount

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Reply to
Benjamin Yazersky CPA

But neither would she have a car resulting in no income.

704set

Reply to
704set

I never heard of a circumstance where the choice is between a $20k/yr luxury car or no car at all. I suppose if she bought a $25K car and paid it over time, she'd never make a sale? The OP even hinted he didn't think this was the best move she could have made. I cringe when I hear/read any sentence that starts "she cashed out her IRA", but at least sometimes the result is a lifesaving operation for a loved one, not a car lease.

JOE

Reply to
joetaxpayer

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