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For my friends here on Vital that may be deducting their MX racing. This is the most recent case. My wife just shared this with me. (She is a15+ CPA and has her Masters in tax) Although it is car racing, it still applies. There was a case in the last couple of years that was related to motocross with the same outcome. Make sure you have a great CPA!
http://www.leagle.com/decision/In%20TCO%2020170614C88/STETTNER%20v.%20C…
http://www.leagle.com/decision/In%20TCO%2020170614C88/STETTNER%20v.%20C…
The Shop
Although sponsoring a race team for marketing purposes is allowable - that is expected to be a financial loss (with hopes of generating a return through exposure and community involvement.)
I am a CPA.
Amazon operated at a loss nearly forever. What did they do to be allowed to continue to deduct expenses?
With these businesses, the time, money and development spent is building value for a future revenue or information that has financial value, reward or potential.
The businesses I was referring too:
"Eventually, if you aren't realizing a profit CRA/IRS will no longer let you deduct those losses because it is not realistically an attempt to generate a profit - running at a foreseeable loss and using the deductions as an advantage to lower taxable income."
When IRS comes to verify that the losses incurred are in-fact building value for the future - your "motocross business" that has nothing that can be converted to future revenues, is proven to be realizing losses with no intentions of converting these expenditures into a future profit.
Hopefully that helps.
But, I would argue that sponsoring an MX team is the same as buying jerseys for a soft ball team - which is community sponsorship.
On the flip side, everything also comes at an extent - if the sponsoring business is nearin a loss because of this "sponsorship" then this expenditure clearly isn't aimed at leveraging exposure through advertising.....but pay for an outside hobby.
If you have more than one sponsor (a number of businesses) this also builds the case for rightfully intended sponsorship.
I have both of my companies names on my bike and Trailors and have proof of work completed thru MX contacts.
I dont write a check to myself and call it advertising, I write a check or credit card to others and post it as advertising. In an audit they don't ask you every line item but checks written to yourself they would pick it apart.
Get real.
Pit Row
A few hundred here and there won't raise any flags but I know people personally that are buying bikes and toy haulers through their business and think that it's okay because they stick a decal on it that has their company name.
Is that boat in a community of racers, sponsors and taking part in competition? NO
If a company sponsors a sailing team to get a boat and compete in an environment of others, then yes the expenditures of the boat can be written off.
And also, you need to own a business to sponsor anything. If you work for someone else - this conversation doesn't apply to you.
Obviously I understand that each scenario must be looked at on a case by case basis. My point, however, was that how something is coded doesn't legitimize an expenditure that would have been disallowed otherwise, as was alluded to in kkawboy14's original post.
Otherwise, when you're blasting the lake on your boat or giving a podium speech at the track - stay away from the babes, if you're married - that will crush your wealth and make all of this irrelevant
Cheers guys.
Many companies have boats "to entertain their customers" as part of their companies marketing plan that they write off!
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