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/...=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.