USA Limousine LLC Company - Start Up Questions WA State

[justjeanna]

Just FYI...I am new...I am working on my Masters and studying for the CPA exam...

I am helping a friend with her 2012 taxes. She started a Limousine LLC company. in the state of WA. She purchased her first limousine (cash). I am finding conflicting information on....

1) options for the purchase of the limousine as a vehicle for hire (Section 179, no Section 179, straight line, 5-year MACRS, etc).

2) options for expenses (fuel, insurance, parking, tolls, repairs, maintenance, etc) for a vehicle for hire (can they be considered COGS, or in this case of "cost of services sold"), or regular vehicle expenses vs standard mileage deduction?

3) One more problem...the Limousine and start up costs (vehicle locator & inspection costs, flight out of state, expenses of driving limo home from CA) were all in December 2011. But final business license not issued until 04/01/13 when business started. She had to become certified with the state, go to limo driving training, etc, etc.. Options--how can she revise 2011 taxes for start up costs of a business that was not a business yet, or is it OK to include in 2012 taxes?

Any ideas/insights/links would be greatly appreciated!

Jeanna

 

[kirby]

Franky speaking. These are the basics and you are willing to but can't help her. Help her find someone who can.

 

[justjeanna]

What kind of help is that? Obviously you do not know the answers or you would have tried to help. Since I posted this I found all of the answers.

 

[The Finance Writer]

justjenna, I promise you that kirby does indeed know the answers. However, your questions a little scattered to address thoroughly in this forum.

For starters, the business did not begin until this year. Hence, the 2011 and 2012 tax returns are not affected.

Non-capital startup costs are partly deductible in the first year of operation and any excess over the dollar limit is amortized over 15 years. Capital costs (the limo) are deductible using MACRS depreciation. Section 179, which is only available to the extent of business profitability, reduces the amount for depreciation.

We can only hope that the limo never incurs any personal use. Therefore, all of the costs for operating and maintaining it are business expenses. Tracking these actual costs should not comprise a recordkeeping difficulty. Hence, the standard mileage rate is irrelevant.

The best way to help your friend is to convey these basic facts, categorize the capital cost separately from all other total outlays prior to the start date, arrange an efficient bookkeeping system for operations since the start, and find a competent tax professional to prepare the 2013 tax return.