NY C32

The days of obnoxous spending for publicly traded companies are long gone. The Sarbanes-Oxley act is well intended but companies have, and will continue to spend too much money just to make sure they're in compiance.

NY C32

You, as a business owner, should know that your comments make no sense at all.

Do you honestly believe that only owners of supercar dealers are allowed to have a supercar as a company car? Based on that idiotic comment, I guess you have to sell planes in order to have a company jet

Almost every single doctor and lawyer in private practice drive a company car. Almost every business owner has a company car. What they drive is a matter of their choice. There may be a limit to how much they can write off and they seem fine with paying the difference but it certainly doesn't mean they're committing fraud.

Just ask one of your accountants because it appears that you were too busy making your billions to listen to the people adding up those zeros

SoCalCLK

NYC, you are exactly right. Any financially savvy wealthy person realizes that taxes are a large portion of potentially uneccessary expenses.

Most of my corporate clients that purchase a commercial building (i.e. a 5-story office building in Santa Monica) for the purpose of housing their business lease the building from an LLC that they own. The lease payments are completely tax deductible from the standpoint of the company making the payments.

This same principle is applied to the lease of luxury cars. Dime-a-dozen realtors do it everyday in Southern Cal. These salespeople lease a Mercedes, which is a nice, luxurious car to drive clients around, and then deduct the lease payments to reduce their TAX LIABILITY.

This is a very simple concept, that anyone with a net worth of more than $25,000 should understand.

The alternative is to pay more taxes, unecessarily.

SoCalCLK

For example, say ABC company buys a nice commercial building for $2 million.
Let's say they borrow $1.5 million from the Bank, and the monthly payment is $10,000.

Monthly Mortgage x 12 = $120,000 in Loan Payments PER YEAR.

These Loan Payments are tax deductible if the building is leased. But they are not if the building is not leased.

Question: When was the last time you deducted you car LOAN payments from your taxes?

Question: When was the last time you deducted you car LEASE payments from your taxes?

C'mon, "rich guys," this is Money 101!

More "dumb" people will pay far more in taxes than they ever will in actual prison time.

tvo7

SO are you all saying this is how to do it simplified?
1. Set up a corporation if I am a physician
2. HAve corporation lease the SLR and claim that it was used 90% of time in business ala "I used the car to try to hire another doctor into the office". Corporation pays the lease payments and tax deducts it from business expenses. After it hits 15% residual then, I the individual, will buy the car from the corporation with my own money in my wallet. SO i can buy an SLR for 200k instead of 500k IF I do this with an E55 insteada, will I be less likely to have an audit form the IRS?

NY C32

Nice follow up

ClayJ

For any other person out there who is reading this thread --

before you try any of this go talk to a knowledgeable tax accountant or tax attorney...Please!

NY C32

Yeah! Thanks captain obvious

I'm gonna give the average MBWorld user a little more credit than you do and say that anyone that owns their own business already has an acountant to discuss this with.

Mr.Gearhead

I am not a "rich" guy... but my spouse unfortunately worked at Arthur Anderson for years. I brought this subject up last night as my "weekly ask the CPA dumb questions" My wife stated, "yeah.. go try this and I will visit you in jail." It was noted the S/O act was for public companies with respect to reporting accurately to stock holders amongst other things. She did state the IRS is undermanned and uses old technology but, it only takes one time from them to catch you. She is a firm believer in GAAP and states every "creative" accountant thinks they know the loop holes...

She sleeps well at night... and so do I..

But hey... if you have an SLR... you're not sleeping... you are out cruisin the strip...

Swing by and pick me up... My Father is a Lawyer.. .hehehe

**I am not saying SLR owner are using creative accounting.. .just speaking to the jacked topics on this thread. Just b/c I can't afford one, doesn't mean there aren't honest hard working weathly people that do..

NY C32

This discussion only applies to privately owned companies. I have no idea whay Sarbanes-Oxley keeps coming into this. It doesn't apply to a single part of this.

I'm not an accountant so I cannot say with 100% certainty that everyone leasing big dollar cars do so legitimately, nor can anyone else. This being tax time, I've been talking with my own accountant and he told me that he doesn't know of a single business owner that doesn't lease atleast one car through their own business. He went on to say that there are annual limits (in dollars) that the IRS allows for lease payments but there are no laws that prevent you from leasing, in this case, an SLR. The business owner has to decide how the difference (lease paymens - IRS limit) is going to be paid. The easiest and most common way is for the business owner/driver to have it count as non-cash income on his/her income statement. Another benefit is that all costs associated with this company car (fuel, insurance, parking) are paid by the company and are also deductable.

This is all based on whether a privately owned company would even qualify for a lease on an SLR or any other big dollar car. That should go hand in hand with the "whether you should" questions. Its not up to the IRS to say whether a certain brand is excessive or abusive to the system and thats why they put dollar limits and have you work out the details. If you own a small peepshow palace on a deserted highway in Nevada, odds are that your company wouldn't qualify whereas a high-power $750 hr attorney PLLC could.

SoCalCLK

Great point. Our conversation here is centered on the individual small business owner, classified as having revenues of less than $10 million per year.

We are not referring to public companies where senior executives get salary/stock option/bonus packages that make the price of an SLR look like a go-kart. Especially those executives and companies that could afford a large firm like Arthur Andersen.

farrbar

As I stated in my post, I do not believe that the activity I described is proper. In fact, the IRS has closed this loophole through an "inclussion" factor. Check out IRS Publication 463 if you want to read the rules. That being said, I bet a ton of people still pull this stunt. I have owned a bunch of nice cars, and every time I buy a car I always inquire of the finance guys at the dealer, and I have learned many of the "tricks" that are used.

I know several people with G500's (obviously not in the same league as SLR) that bought in company name and wrote the whole thing off in one year due to increase 179 Limits. The jobs creation act increased these limits so that compaines would buy new equipment.

Unless we go to a flat tax we will always have people that try to navigate the gray.

P.S. - As an accountant Sarbanes-Oxley "SOX" has been very good for business. As an investor, I think in many cases the cost that the company incurrs FAR outweighs the benefits. It is only a matter of time that a Company that has been certified as SOX compliant has an explosion. SOX raises the stakes (i.e. jail time for execs) and will cause the crooks to be more creative, but it won't bring religon to the crook.

NY C32

Nice post. I agree 100%

To get back to the topic - I would have to say that most people who can afford this car, buy it. Depending on their situation, they may finance it rather than paying cash but I would lean towards more cash customers.

OnyxCLK

well, may be we should look at this thru a different point of view.. I mean having an SLR is not like having a regular benz, it's more like a prestige car, like having a ferrari or a lambo.. and I believe that when you buy a car like that, you gotta pay it in cash... at least that's what I heard from those people who has such "super" cars, and probably that's the way I would go if I could ever afford it...

Mr.Gearhead

I think all the posts offer different views. I agree those with the means just cut the checks and ride off.

Leasing the car in the company's name is fine. I believe the topic of personally buying the car at the end of the lease for a huge discount due to tax write off is where the conversation started. A lot more folks know a lot more about this than I... maybe that is why they drive an SLR and I don't.

Either way... Incredible car and Kudos to the folks that have the change to own one!

good discussion though...

patrick_y

I've been told that a huge percentage of Ferraris are leased for tax write off. However, this is very difficult and you need to have a huge income if you want to write off this kind of a lease (plus the downpayment is a staggering $20-40k from what I've heard).

I'm also told that the maximum IRS car tax write off is only around $800 a month. So if you want to write off a car like a Ferrari, that's going to be rather difficult.

I actually do know of someone who does lease a Ferrari and write it off. I think it's stupid because if you play your cards right, you should buy it, and sell it in a year and not even lose much to depreciation (Ferraris depreciate on a different schedule). Thus, leasing a Ferrari is just wrong.

Leasing an SLR is a good choice since the car sees massive depreciation.