The Cost of Ownership

[adamdegraff]

Hope Y'all are enjoying a nice summer. My crew is busy getting ready for our tour and had a meeting with our accountant tonight. And now I'm more confused than ever. My question is this... (And feel free to stop reading right there if you want the short version.)

How much, per mile, would you say it costs to run a 96 Marathon with a 6 speed series 60? Fuel, oil changes, regular maintanence stuff. (Not major repairs, etc.) I tend to get about 7.25 MPG

The question of mileage came up. Our accountant said that since it is likely our bus is fully depreciated that the easy way to do this would be the the Montana LLC (Which I own, and in turn owns the bus) could rent my musical group (of which I own a percentage) the bus for the year. Same thing for my partners as well. The accountant said we could charge $70 a day for "lodging" and 50.5 cents a mile for mileage. I'm pretty sure that with fuel at $5 a gallon that I'm not coming even close here. Tour is 40,000 miles and approximately 270 nights on the road. I'll admit that I have a rather simplistic way that I think this kind of stuff SHOULD work... Like, I'll go out and play lots of concerts and sell lots of CDs and get my share of the loot.... and I'll pay for fuel and insurance and oil changes, and then I'll deduct my costs from my earnings and only pay tax on my net earnings.

Anybody out there that would be willing to explain this to me? I just came from 3 hour meeting with our accountant and I feel like I had better be understanding this stuff just a little better before I sign up for this route.

Thanks in advance. And by the way, all you guys who suggested AAP in Virginia for Cruisair service... I talked to Johnny on the phone and was super impressed. What a nice guy. I'll be paying him a visit later this summer. Thanks for the good tip!

All my best,

Adam

[garyde]

Hi Adam. If you have a set of accounting books for the LLC and another set of books for your band, one way would be to simply Lease the bus to your band . You would have income to your LLC which would be offset by Maintenance costs, Bank Note payments , etc.
The Band would pay a Fee for the year, over 12 months , to Lease the Bus. In addition, the Band would pay for fuel, and Tires .
The Band would write off all costs as expense, prior to distributing any profit to partners.

[jello_jeep]

Atta boy Gary D, spoken like a true businessman!!!!!! That is a great plan..

[Tully]

Bought my bus this year. I own my own business. Your band is your business. Under the IRS Section 179 you can purchase machines and product for your business up to $125,000 and can choose to depreciate it in the first year. This could add up to some serious tax credit/s. The only rule is that you can only dep. up the the amount of your income. So, if you make $80k a year this would be your cap. Basic math a 1/3 tax would yield you about $41k in tax credit based on the full $125k. This is the basics and you will want to read further into this code.

This Section 179 has been abused by many accountants and attornies and in Jan 2010 is be phased back down to $25,000 from what I understand. They were buying Hummers and the like and getting large tax breaks. The so called loop hole/s. So, the window is closing soon for this tax credit. My accountant went over this with me in great detail and this tax break should be used by anyone who is self-employed or the like.

Tully Lee Garrett

[adamdegraff]

These are great ideas... akin to those my accountant is using. My question about the 50 cents per mile though... once you take that 50 cents, that's all you get. Isn't it better to use the actual costs?

~Adam

[JIM CHALOUPKA]

http://forum.prevostownersgroup.com/showthread.php?t=1202&highlight=cost+per+mile

[Jon Wehrenberg]

$.50 a mile isn't even close.

I would suggest you keep detailed records and expense direct operating costs such as fuel, oil changes, repairs. Some repairs such as tires, air springs, etc have a life so it is up to you and your accountant to determine if you have to depreciate them or if you can expense them.

Don't forget insurance, and even incidental expenses such as Direct TV susbscriptions.

[Petervs]

First of all I would suggest you get a better accountant.

When you buy a bus and put it into business service, that is when depreciation starts. You can depreciate it under several schedules not just the first year big deduction mentioned above. if it has a service life of 3 or 5 or 7 years you can choose that time and do a straight line depreciation. Depends on how long you plan to use it for business and in what years you want the expense to offset income.

I pro rate my bus used between business and personal travel, a varying percentage each year. I add up all the expenses of owning it ( fuel, maintenance, insurance, etc...) and the business percentage of that is a deduction to my business income.

Be wary of the mention of "credits" in prior posts, there is a big difference between a tax deduction and a tax credit.

Seriously, I think your accountant needs more education, and I do not think it is your job to do that, find one who knows his stuff better.

[Denny]

If your LLC is the typical one that many of us have, there are no taxes filed or paid either state or federal. Be careful on the accounting with the LLC or you may be into a lot more expense than you anticipated with the LLC

[Jon Wehrenberg]

Wow....how do you have an entity like an LLC that has no reporting requirements? Talk real slow. Because an LLC (Limited Liability Corporation or Company) is presumed to be a business and thus has an obligation to file, I want to know how you are avoiding filing.

If you do not have to file because the LLC has no status as a business, why go to the bother of forming one. Just register the coach in your name in Montana at some mailbox service with a physical address.

[Denny]

Details, details, details. That's why we hire attorneys, accountants, business advisers, etc. If we knew everything we would not need them. Its been nearly ten years ago when I formed my LLC and I was told then that I would not have to file tax returns and have not done so. To date I have not been questioned.

I believe the reason was because the LLC was not conducting business. I have other LLCs in Ohio and yes, I do have to file and pay state and federal taxes but these LLCs are conducting business. There is also the protection of a corporation from personal liabilities that would not be available if the bus was registered in an individual name.

My concern was if Adam's LLC starts conducting business and has a set of books then it may become necessary to file tax returns since the original reasons for establishing the LLC has changed.

If any other questions contact my Montana attorney, John Bennett, and he will give you the real reasons.

[Jon Wehrenberg]

I'm not an attorney, I did not sleep in a Holiday Inn Express last night, and I know diddly squat about the law and accounting.

But I do know an LLC is a business enterprise. It does not have to be active, it does not have to generate and income or a loss, but it does have to file a tax return. If an LLC was formed solely to EVADE (avoid is a legal way of not paying taxes and an LLC formed solely to avoid taxes is close if not actual evasion) taxes is a very risk proposition.

If an LLC is formed to provide a means of renting a bus that is a business enterprise and will require tax returns, and that allows depreciation and the claiming of expenses to offset income.

[JIM KELLER]

I suspect this group has at least one attorney in the membership and I hope they will participate in this Thread.

[Sid Tuls]

Just a note if you have one of these bs LLC in Montana make sure you have it for your tow car as well!! They are ticketing here in Calif. I speak of experince they got me big time!! Plus they honestly have bounty-hunters in R.V. parks to turn you in to the Highway Patrol. Beware of Pismo Coast Village.







Sid & Judy Tuls
2007 Thompson

[Ray Davis]

Sid,

I've long been expecting this to happen in CA. There's been other recent reports of huge fines in other states.

If it's not inappropriate to ask, what were the consequences?

Ray

[truk4u]

Wrong Jon Boy, no business transaction in an LLC, no tax return. If there is business transactions, it flows to the owner just like a Sub S and requires a tax return. I have multiple LLC's and the ones with no business transactions have never had a tax return filed in Georgia or elsewhere.

Jim - We had one pretend Attorney, hope we don't get any others....

[MangoMike]

Jon,

The law firm I use in Montana has informed me the same thing of no reporting requirements as long as the LLC doesn't produce any income. I'm sure there is more, and I'll try to find the explanation from him.

Mike

[Sid Tuls]

Highway Patrol informed me that if I have my residence in Ca. & have a Ca drivers license the bus needs to be license in Ca. So if I didn't do it they would shut down all are cattle trucks. So I had no choice. They told me that Calif. is going after the Montana Law Firm. Don't blame for this state moving all cattle operations to West Texas!!!! At lest they welcome AG. I'am sorry if I sound negative but Calif. thinks BEEF & Milk come from Costco. So the bottom line I paid the tax.





Sid & Judy Tuls

2007 Thompson

[Ray Davis]

Sid,

Sorry to hear about that. Sure sounds like CA is starting to enforce this stuff, along with some other states.

Personally, I was afraid to try the Montana LLC with my two coaches. Others will certainly disagree, but I felt wrong trying to not pay any taxes by doing that, when the coach was stored in CA, driven in CA, with a CA toad and DL etc, etc.

I will admit, I hated the high cost of it however. It was downright painful when I registered my last coach.

Ray

[lewpopp]

I read somewhere there would be a road tax if you claimed your bus for business if it was licensed in Montana. That's why I told my wife to stop "hookin" out of the bus. Don't want no friggin road tax reports.

[garyde]

Jon. The Montana attorney's take care of all yearly filings.
Adam. You might want to check with your accountant or another one regarding Leasing. There are plenty of business models out there which can be copied.
I spoke to a company who wanted to have me Lease my previous Coach out to people @ $4000- 5000.00 per week . I would take care of Insurance, maintenance, tires, etc. , they would get a commission for leasing it, the lessor would pay for diesel. Some people do this, but I felt it would be too much wear and tear.
With the entertainment Coaches, the lessor also has to pay for a Licensed driver as well.

[flyu2there]

Just a note if you have one of these bs LLC in Montana make sure you have it for your tow car as well!! They are ticketing here in Calif. I speak of experince they got me big time!! Plus they honestly have bounty-hunters in R.V. parks to turn you in to the Highway Patrol. Beware of Pismo Coast Village.
Sid & Judy Tuls
2007 Thompson

My alter ego wanted me to reply to this thread

A few years back Oregon was the place to license RV's, like Montana, no sales tax. Couple of big dealers, like Buddy Gregg and Guaranty got into some serious do-do setting up dummy addresses in Oregon, not to mention those who were willing participants. Seems not only did the home state want its money and penalties (California was a major player here) but Oregon realized that if one of the boxes on their vehicle registration form that was required to be checked and signed, affirmed that the owner was a resident of Oregon....mmmmmmm, guess what they, just became liable for Oregon State Income Tax. That mess is still shaking itself out!

South Dakota and Texas were two other popular spots for registering RV's but once again, there were always snags, similar to those encountered in Oregon.

Now enters the Montana LLC....great, unless you live somewhere other than in Montana or possibly, rural Mexico. Just keep your coach parked where someone may notice it, say a storage lot or in your driveway in Beverly Hills. Go to any state MVD or DMV web site and look up the little section, "New to State." While each state is different, at the end of the day, it will mandate that you have so many days, weeks or months to transfer your registration/title to that state; many states will want to also collect either sales or use tax as well, if it had not been paid to another entity. The only real option here is to keep the coach moving, like a full timer, and never stay in one place too long.

I guess what I am attempting to point out is that there is no free lunch! I know there are dozens of Montana Attorney's who know all of the laws in Montana regarding the LLC however remember one thing, they are Montana Attorney's, not California Attorney's, New York Attorney's, Florida Attorney's. While they certainly have a smattering of knowledge of the laws in other states, I doubt you would find any willing to defend you or the LLC position say in a California Court, for openers most probably cannot practice law outside of Montana. (The BAR thing)

Joe Baggadonuts
Representing Dewey, Cheatham and Howe