On partnership's books, auto expense is gas cost. However, the deduction per mileage is larger deduction by $945. So, Equity is lower than assets by $945. How to fix?

Forum|Forum|3 years ago
September 9, 2022
1 reply
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The 1065's P&L shows the auto expense greater than its cash usage by $945, resulting in Partners' Liabilities & Equity $945 lower than its Assets because the partnership expense lowers Partners' Equity but not Cash. The result is the Balance Sheet (Schedule L) is out of balance by $945. I would think there would be a ProConnect entry for this somehow, but I don't see it. How do I deal with this?

ProConnect Tax

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Best answer by prkwork

@prkwork wrote:

And then the partners would deduct on their personal returns the full $1,353-

Why would the Partners deduct anything on their personal tax returns???

As was noted above, there is no provision for Partnerships or Corporations to use the the Standard Mileage Rate. And even if they could, the Standard Mileage Rate can only be used *IF* it was used in the first year, and you said they used Bonus depreciation in the first year.

Some more details: The vehicle was purchased in 2021 and fully written off in 2021 (bonus depreciation). So, use of standard mileage would be proper for this first year of ownership. However, you and others say that a partnership can never use standard rate. I see that that is true. This was my first time with a business-owned vehicle. This is something I should have known. Thank you all.

sjrcpa

Level 15

Assuming your auto expense deduction is correct, the difference is an M-1 adjustment - expenses on tax return not on books.

The more I know the more I don’t know.

P

prkworkAuthor

Level 4

Entering that $926 does affect Schedule M-1 but it does not affect the Balance Sheet (Schedule L), where it is still out of balance by the $926. This is the issue here.

sjrcpa

Level 15

Compare your tax return Balance Sheet to your trial balance and see what is off.

The more I know the more I don’t know.

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