Company vehicle purchase with personal trade in

USA Discussion in 'General Accountancy Discussion' started by Leapcarlson, Oct 16, 2018.

  1. Leapcarlson

    Leapcarlson

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    The owner's son used his personal vehicle to buy a new company vehicle. I can only see three ways to record this.
    1. Pay the son for the trade in value received. Then record the vehicle normally according to the documents received
    2. Record the vehicle as being partially owned according to the percent paid by the company. We would now be partners with the son in the ownership of the vehicle.
    3. Make the son a partial owner in the business and record the trade in value as an equity contribution.

    I am thinking number one is the best way and probably GAAP.
     
    Leapcarlson, Oct 16, 2018
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  2. Leapcarlson

    Samir VIP Member

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    Who owns the new vehicle? I'm assuming the company. Why did the son do this?

    It depends on why the owner's son did this as they are not related to the company in any way. If this was to help his father, the owner of the company, it would be no different than giving his father the vehicle and then the father using it for trade which would be an additional capital contribution in the business by the father. In this scenario, the agreement between the father and son would be some sort of implied one and would be subject to any applicable rules on gifting from son to father, if there are any.

    If the son is actively involved in the company, it would make sense to make them an equity partner, although that would also require any other step to modify the corporate documents for full effect.
     
    Samir, Nov 8, 2018
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  3. Leapcarlson

    kirby VIP Member

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    Leapcarlson
    You are correct. Use #1 and avoid all sorts of complications.
     
    kirby, Nov 10, 2018
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