It seems that every year a "clever" taxpayer gets the idea to wrap some advertising around his car and deduct all of the costs associated with the car as advertising expense.
Here's a different wrinkle on the idea that has me stumped. Taxpayer runs a business selling aftermarket auto parts/services for customizing vehicles. Clientele consists of both customization business and individuals. Taxpayer bought an older car, stripped it down to the frame and is rebuilding/customizing the car with the parts that the company sells. When complete, the car will be driven to car shows, etc., to show off the how the parts will look in a car and the services the company can provide.
My question is... how do I deal with the costs associated with the rebuild? Are we creating a depreciable asset (capitalize sum of all the out-of-pocket costs), are the costs treated as auto expenses (repairs and maintenance of vehicle), advertising (all or part of cost [I don't know if there will be any "graphic" advertising on the vehicle]), something else?
In case it matters, the business is a sole proprietorship and there is no intention of using the vehicle for any purpose other than displaying at shows or to potential business customers.
Ira Smilovitz Leonia, NJ