Racing as a business Options

[slowTA]

Wow, you really can find ALL kinds of unexpected info on this board!

[nape]

Nape...you can certainly run a business and use racing as a form of advertisement. Several people I know do this. You could end up getting into trouble if you get audited and cannot show that your racing ever resulted in revenue for the company though, so its not a slam dunk. In an audit, the IRS may decide to claim that your advertising is actually a hobby and is unrelated to the business. This is a difficult one for sure.

Paid sponsorship definitely qualifies the racing effort as a business. It is an advertising company, similar to a magazine.

So, if the consulting company is making money and using lead tracking as a way to justify advertising money spent, I would be able to write off whatever money was spent on the race car as advertising as long as it was approximately the same?

Sorry, Al, but I've always had trouble wrapping my mind around tax info.

[sgarnett]

I wonder how one would classify and depreciate an uninsurable asset, like a race car?

"Sponsorship" is outside my experience and expertise from both sides. Once upon a time I did some consulting work, but there was no hobby overlap and I wasn't into racing at the time. So, let's ignore sponsorship for the moment.

If you buy a PC for a home business and use it 30% of the time for business and 70% of the time for personal use, then only 30% of it is deductible. If you build a race car for business use and actually use it for paid instructing 30% of the time and personal use 70% of the time, then 30% of it is deductible.

Advertising and the need for practice do muddy the water, but if I understand correctly you will not actually be instructing in the car or otherwise using to directly produce income so it may not be 100% deductible.

I'm not sure if you need to consult with a CPA or a lawyer that does small business work (or both, of course). In my case, I got much better advice from the lawyer.