By Howard Abrams, PBS Tax & Bookkeeping
Q. From 2006 to 2010 I made a living with one truck. I always reported everything on Schedule C. Then my son came into the picture. He began investing money by buying two more trucks in 2011 and then bought another truck plus three trailers in 2012. The company makes more money but also has more repairs and maintenance.
We’ve paid no taxes yet. How do I report the investments for equipment and how do I return this investment to my son? How should I reflect this on the Schedule C? Do I need to file another form? What should I do first?
A. Reporting the investments your son made and returning his money raises many issues. You must determine whether or not you are going to be in partnership with your son or whether your son is going to work for you as an employee. Or, your son is not going to work with you at all and simply made a loan to enable you to expand your own business. If your son is going to work with you as a partner, which I suspect, then I suggest a written agreement be put into force outlining the business structure.
Reporting the equipment on Schedule C and returning the investment depends on the ultimate structure of the business. Schedule C may not even be used or your son may not be involved. First decide how the business operates, your son’s involvement and then, with guidance, the answers to your questions will fall into place.
Q. We are husband and wife team drivers and need to raise money from some of our investments by the end of January 2014. Should we be selling some of our appreciated stocks by the end of the year or wait until January?
A. We get this question every once in a while. Our first concern is the possibility that capital gain rates may rise in 2014. You should first review your portfolio to determine which investments you need to liquidate and how much gain would result. Then review the portfolio further to see if there are any investments that have losses to possibly offset those gains.
Be ready to sell the necessary equities in case Congress does act to raise rates. Stay aware of the potential for a rate increase. If you wait too long and an increase does pass, you can bet people will start unloading and your equities you want to sell may be at a lower value.
Q. I am starting my own trucking business and some of my friends have told me that I should incorporate. What is the best way to run my trucking business?
A. We suggest truckers new to business begin their operation as sole proprietors. Sole proprietorships are the simplest form of business to own and operate and are the least costly to set up. They are not considered a separate legal entity. Separate tax returns are not needed. The sole proprietorship business is reported as part of the owner’s individual income tax return.
While sole proprietorships are the easiest business form to set up and the cheapest to operate, the owner of the sole proprietorship is responsible for any liabilities of the business. Therefore, examine your assets prior to going into business and consult with an attorney if you feel you need liability protection. You may also set up a LLC – limited liability company – and operate it as a sole proprietorship. LL
This article is written by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for more than a quarter-century. If you would like further information, please contact PBS at 800-697-5153 or visit their website at pbstax.com.
Please remember everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.