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I have a new client this year that operates a escort pilot car service. These are the cars that drive ahead of wide loads on the road. This is a partnership (form 1065) and both the husband and wife are 50/50 partners. This is the 4th year of operations. They put 150,000 miles among 2 different cars in 2023, all business use. The prior preparer had just been deducting the mileage on the partnership as an other expense. For my other partnership businesses, I normally deduct partner's unreimbursed mileage on their personal 1040 return as "unreimbursed partnership expenses (UPE)." This pilot car business is a new situation for me. What would you do, deduct mileage on the 1065 like it has been done for the last 3 years or put it as UPE on the form 1040?
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1) Who owns the cars, the partners or the partnership?
2) Does the partnership actually reimburse the partners or not?
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Cars are titled in the husband and wife's name. Partnership doesn't reimburse.
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@josephfolsomcpa wrote:
Cars are titled in the husband and wife's name. Partnership doesn't reimburse.
If the Partnership didn't pay for it, it doesn't belong on the 1065. How did the Partnership books balance if it claimed a deduction but didn't actually pay for it?
If the Partnership Agreement says the Partners are required to pay for those expenses, they can deduct it as UPE.
