Ed and Marie Smith own a construction company. Their son, Jim, is a very popular

Question

Ed and Marie Smith own a construction company. Their son, Jim, is a very popular and accomplished motocross racer. The Smith’s construction company, EMS, sponsors Jim in his motocross racing activities. They place advertising banners, logos, etc. on a motorhome and trailer used by Jim when he travels to motocross events, and EMS is always showcased as his sponsor.

When travelling to motocross events, Jim uses a toy hauler motorhome and trailer to transport his motorcycles and other supplies and equipment. When traveling to events, either Jim’s father or brother accompanies him to help as a mechanic. The toy hauler has 3 different beds and they sleep in it while traveling.

In the year in which the motorhome was purchased, Ed and Marie deducted the cost of the motorhome under Code Section 179. The IRS concedes that the other expenses are properly treated as business expenses of EMS, but the IRS argues that the cost of the motorhome cannot be expensed under section 179 because it can be used for lodging.

Can the cost of the motorhome be deducted under section 179?

Explanation / Answer

Section 179 is an IRS tax code under which businesses are allowed to deduct the full purchase price of qualifying equipment that has been purchased during the tax year.

Vehicles that qualify for section 179 are “business-use vehicles”. In this case the primary purpose or use of the motor-home is to provide Jim a place to sleep as well as to transport his motorcycles and supplies and equipments. This motor-home is not being used for the business of EMS which is the construction company of Ed and Marie.

Hence in this case the cost of the motor-home cannot be deducted under section 179.

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