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View Full Version : Buying guns as a tax write off????


IrishPirate
05-07-2010, 11:19 AM
I need your help with this one Legal Guys....

Would it be possible to write off the purchase of certain guns on your taxes if you owned an ammo reloading business? here's my train of thought:

If you reload as a small, home business, you would want to have an edge over your competition. Buying chronographs to get exact data on your loads would help do that. You can't test that data unless you shoot the rounds. You can't shoot the rounds without a gun. And, different lengths of barrels produce different FPS readings, so it would make sense to test your ammo in different length barrels; ie, more guns.

Not only would you be gathering data, but you would be testing feeding reliability, accuracy, recoil, etc. The only way to gather proper data is to do a wide range of test. That's not possible unless you have a wide range of guns with which to test.

SOOO.....would you be able to purchase different guns for your business, and write the expense off on your business taxes?

I can see an issue with using the guns for something other than testing (like a CCW), but lets face it. The difference between plinking and testing is just recording what each shot does. It's just as fun to "test out" your new gun as it is to go out plinking with it after years of having it. So in essence, you would be able to go out plinking and write it off on your taxes. Every range trip where you shoot your own ammo would be a "test" basically. (i believe the ammo tested is a write off also). You'd have a serious gun collection that pretty much paid for itself, and you can enjoy shooting ALL THE TIME if you needed to test that much ammo (like if you did batch testing).

Anyways, what do you Legal Guys think about that? Would it fly as a business expense? Does that mean you could write them off? (assuming you were making enough sales to do any write offs)

Thanks

HowardW56
05-07-2010, 11:46 AM
You had better have a lot of money to try it in Tax Court... if you were buying test barrels maybe...:confused:

nick
05-07-2010, 12:24 PM
There're many ways to define the difference between a business expense and a hobby, and most people fail miserably at that. For example, buying guns as an individual and then claiming them a business expense for an incorporated business isn't likely to fly. If you buy them for your business and as a business, sure.

You need to consult a good CPA or better yet, EA, not a lawyer.

Untamed1972
05-07-2010, 12:32 PM
I would think to start off with you'd hafta be licensed as an ammo manufacturer first. Because unless you're licensed you cant sell your reloaded ammo. If you can't sell your reloaded ammo then it's going to be hard to claim you're "in the ammo reloading business".

If you were actually licensed, and were actually selling ammo, then I dont see why at least some gun purchases and range time expenses and such could not be used as legit write-offs. The thing the IRS wants to see is some evidence that you are actually "engaging in legit business with an intent to make a profit", not just creating ficticious businesses with intent of generating write-offs.

I also beleive there is something in the tax code that says you can only operate a business at a loss for 2 out 3 yrs or 3 out 5 or something like that. Basically meaning you can't run a business at a loss every year forever because then it's most likely you're not operating the business with an intent to make a profit.

Mstrty
05-07-2010, 1:11 PM
Dont exclude security from your taxes, Alarm, Locks, GUNS :)
What about any business sponsoring a shooter. Sponsorship dollars are just advertising dollars.

If the owner of a telephone company wants to get more business and decides that his advertising money needs to get spent with shooters. After all those are the types of customers he is going after. He then gets a uniform advertising his company and a Gun with ammo to participate in the exhibition. Why Not? Maybe he gets business off of it maybe not?
Arent machine shops allowed to buy motors to race with their name on the door? Is there a difference?

tiki
05-07-2010, 2:17 PM
Become a firearms instructor and buy them for use in training.

OleCuss
05-07-2010, 2:22 PM
Great way to get audited!

paul0660
05-07-2010, 3:20 PM
It makes sense, but you can't lose money forever (unless you are listed on a stock exchange:))

I would give it a try, but also keep the taxes saved in an account and be very courteous when they show up.

RolinThundr
05-07-2010, 5:54 PM
If you are an LEO and buy an AR for duty use (agency does not reimburse nor issue patrol rifles/carbines), can this count as a legitimate tax write off?

How about dry cleaning if your uniform requires it? Haircuts?

Pyrodyne
05-07-2010, 6:09 PM
This thread appears to be rapidly degrading...

So, how about writing off the portion of the water and paper bill for "doing business"? You could write receipts on the toilet paper in case of an audit.

This thread really needs an expert that really knows tax law, but i'm gathering that the simple answer is no.

rkt88edmo
05-07-2010, 7:24 PM
There're many ways to define the difference between a business expense and a hobby, and most people fail miserably at that.

Pretty much this. Your chances or being audited are fairly low, but if you get caught palying cutsie games, the IRS will try to hammer you. A hobby is a hobby, a business is a business.

VictorFranko
05-07-2010, 7:52 PM
I need your help with this one Legal Guys....

Would it be possible to write off the purchase of certain guns on your taxes if you owned an ammo reloading business? here's my train of thought:

If you reload as a small, home business, you would want to have an edge over your competition. Buying chronographs to get exact data on your loads would help do that. You can't test that data unless you shoot the rounds. You can't shoot the rounds without a gun. And, different lengths of barrels produce different FPS readings, so it would make sense to test your ammo in different length barrels; ie, more guns.

Not only would you be gathering data, but you would be testing feeding reliability, accuracy, recoil, etc. The only way to gather proper data is to do a wide range of test. That's not possible unless you have a wide range of guns with which to test.

SOOO.....would you be able to purchase different guns for your business, and write the expense off on your business taxes?

I can see an issue with using the guns for something other than testing (like a CCW), but lets face it. The difference between plinking and testing is just recording what each shot does. It's just as fun to "test out" your new gun as it is to go out plinking with it after years of having it. So in essence, you would be able to go out plinking and write it off on your taxes. Every range trip where you shoot your own ammo would be a "test" basically. (i believe the ammo tested is a write off also). You'd have a serious gun collection that pretty much paid for itself, and you can enjoy shooting ALL THE TIME if you needed to test that much ammo (like if you did batch testing).

Anyways, what do you Legal Guys think about that? Would it fly as a business expense? Does that mean you could write them off? (assuming you were making enough sales to do any write offs)

Thanks

TALK TO YOUR TAX MAN.
I used to manufacture and sell a musical instrument accessory for the 5 string banjo.
Now how could I possibly test my product if I didn't own a banjo?
So I bought a Gibson Granada Banjo. The best and most expensive banjo available.
I could not reasonably test my product on a piece of junk banjo made in Taiwan and expect to warranty it to work on the finest instruments, but if it worked on the finest instrument available, you could reasonably assume it would work on the cheapest.
I wrote the purchase price off and was never questioned by the state or the feds.
It would help if you were legit and had a business license for reloading of ammunition, just a thought.
BTW, I still have the banjo 20+ years later and still suck as a banjo player.

wjc
05-07-2010, 9:20 PM
I would make one minor correction here. Instead of talking to your tax man (I'm assuming an accountant type that does your taxes) I would instead talk to a TAX ATTORNEY. I would think they would have a better understanding of the legal opinions and ramifications.

IrishPirate
05-07-2010, 9:37 PM
guess it wasn't obvious that I meant doing so as a FFL ammo realoader....my bad.

Yes it would be a fully licensed ammo dealing business, and yes it would be a for profit business. I'm not talking about buying every gun i can, but a gun for every caliber i reload, and two or three at different barrel lengths....

Also, if the guns were purchased for the business, and used only to test the ammo (which would be just as fun as plinking, that's what I was trying to say) and if records were kept about every shot from every gun......

And if the guns were only purchased once (not several of the same model), I think it would fly each time you wrote a new gun off. But you're right, a tax expert would probably know the fine lines and that's what i was hoping to find here.

So, when being used as a legitimate business resource, for a legitimate for profit business, would it be a tax write off? To me the answer is yes because it's no different than buying any other machine for a business.

paul0660
05-07-2010, 9:42 PM
So, how about writing off the portion of the water and paper bill for "doing business"? You could write receipts on the toilet paper in case of an audit.

An in home office, including a percentage of utilities and the percentage of mortgage or rent applied to the square footage of the office, is a legitimate deduction, frequently audited, and more often than not approved.

Tax law is like gun law.... if you ask the agents, they will say no. If you do it and believe you are in the right, according to their published rules, the ball is in their court. Tax avoidance (doing your best to not pay them legally) isn't a crime............................YET.

IrishPirate
05-08-2010, 5:36 AM
i just can't see how it wouldn't be a legitimate write off. Just because it's a gun? well in Commiefornia that may be what they try to push, but in the end, it's just a tool to do a job. If it only serves that purpose then why wouldn't it be legit? Unless there is some specific tax code that doesn't allow for firearms to be written off, I honestly can't see how it wouldn't fly.

Pyrodyne
05-08-2010, 6:42 AM
If you have a business license AND an FFL06 and keep all those records you mentioned, I don't see why it wouldn't work as a legitimate business expense.

Just keep extra money for tax season, and be prepared for a surprise audit. I do lots of computer work, and do write off expenses for tools. I don't see why it would be any different in your case.

rkt88edmo
05-08-2010, 7:34 AM
If you have a business license AND an FFL06 and keep all those records you mentioned, I don't see why it wouldn't work as a legitimate business expense.

Just keep extra money for tax season, and be prepared for a surprise audit. I do lots of computer work, and do write off expenses for tools. I don't see why it would be any different in your case.

I think thats the main difference, doesn't sound like he plans to do much, if any business.

robairto
05-08-2010, 7:44 AM
If you are an LEO and buy an AR for duty use (agency does not reimburse nor issue patrol rifles/carbines), can this count as a legitimate tax write off?

How about dry cleaning if your uniform requires it? Haircuts?

YES

weezil_boi
05-08-2010, 7:53 AM
me thinky...

Im sure you can write them off as you are asking, or in some similar fashion.

You should have a CPA. CPAs and Tax Attorneys are like everything else... good ones are your grace, crappy ones will get you screwed.

If dont have one you are confident in... PM me. I see you are ins roseville, mine is in sac. Not too far a drive for solid advice.

I hope your biz works out. That would be great!

Curtis
05-08-2010, 3:06 PM
Any business can write off business expenses. There are specific limitations on some items (food is a major one). Lots of small businesses get into trouble when they don't understand the laws and/or start using business accounts like personal accounts. I have a client that is building a multi-million dollar home and every check is cut from his business account. Is he committing tax fraud? It is suspect, but then again he might claim all the money paid out as income at the end of the year.

I just got my 06 FFL. I am working out the details on a business plan/funding and will begin making/selling ammo in the next month or so. I have started several businesses over the years. An ammo manufacturing business is significantly more difficult due to the regulations and other requirements.


Edited: I was distracted by the kids when I was writing my post and missed the item quoted by rkt88edmo below. Sorry about that. If you have any questions, let me know. I have been audited by the IRS as well as very involved with an amazing CPA. Good luck with the new business.

rkt88edmo
05-08-2010, 5:05 PM
guess it wasn't obvious that I meant doing so as a FFL ammo realoader....my bad.

Yes it would be a fully licensed ammo dealing business, and yes it would be a for profit business. I'm not talking about buying every gun i can, but a gun for every caliber i reload, and two or three at different barrel lengths....


Ooops, didn't read this one, if this is the case, then I don't think there would be much of a problem expensing quite a few guns per calibre as you specified. If you keep the records for how they were used for the business you should be fine. Just make sure it is a business and not a hobby.

IrishPirate
05-08-2010, 7:05 PM
Thanks for the advice all. I wasn't thinking about starting a business and running out and buying $30k in guns....I was thinking more like one or two when I could afford them. This was something that just came to mind while I was planning out needs for a home reloading setup. I figured getting an 06FFL and selling ammo would be a good way to fund some guns I want, and then I though....if it's a business, why wouldn't I be able to write those guns off? I wouldn't have the ability to do it all at once, but I'm thinking ahead to what might be possible. It was one of those cool ideas that made me think, why not?

If I did it, it would be 100% legit. I'm not going to work in any grey areas and hope for the best....to me it's not worth the hassle. Plus, I thought I'd throw the idea out there for anyone else who has a setup already and maybe plant a seed in their minds about how to get those guns they want, and have their business pay for them. If I start anything, I'll let you guys know. Thanks again, this is why I love Calguns :thumbsup:

rkt88edmo
05-08-2010, 8:39 PM
Well, there was this one guy, Freakshow, who started his own reloading business, but it didn't do so well off the bat...

freakshow10mm
06-23-2010, 8:44 AM
I figured getting an 06FFL and selling ammo would be a good way to fund some guns I want, and then I though....if it's a business, why wouldn't I be able to write those guns off? I wouldn't have the ability to do it all at once, but I'm thinking ahead to what might be possible. It was one of those cool ideas that made me think, why not?
Trouble comes when you mix business purchases to deduct tax liability but ultimately keep them for personal use.

If I did it, it would be 100% legit. I'm not going to work in any grey areas and hope for the best....to me it's not worth the hassle. Plus, I thought I'd throw the idea out there for anyone else who has a setup already and maybe plant a seed in their minds about how to get those guns they want, and have their business pay for them. If I start anything, I'll let you guys know. Thanks again, this is why I love Calguns :thumbsup:
I have a home based reloading business. I also have my FFL as a type 07 (firearm manufacturer) which makes it easier to buy guns for the business use of ammunition testing since I can have the company buy it and keep it in business inventory without having to mess around with a corporate purchase of a firearm on a 4473 (PITA let me tell ya!-I've done a couple for a research company around here). With the 06, you can only do ammo stuff.

With tax deductions as a ratio of business use to total use of your property, it's nice having a home business. The ratio is easy but be very careful about utilities. If you don't use the water service in your home for your business directly (using a bathroom that is also used for personal use cannot be deducted) you better not claim it. I have gas deduction for heat and electricity deduction for lights and power for equipment. No water since there is none I use solely for the business. I have my entire business inside one dedicated room of the house with additional storage in the garage (brass and rarely used equipment). I deduct the room area, not the garage area because it's business and personal use in the garage. That would not fly with the IRS.

As with any business, get a CPA before you buy anything or do any business. Also alert him to the FET you must pay as a manufacturer and point out the different rules for wholesale, retailer, and retail sales; especially if you do one or two but not the other (like if you do retail sales but no wholesale, taxable sale price is 75% of the actual retail price and 11% FET is calculated on that figure, much like your "adjusted gross income" on your personal tax paperwork). The rules will change drastically and it sucks big time if you aren't on top of things. One of the key things to a successful business is accounting. Bill accurately, get paid on time from your customers, and pay your bills early to get the discounts. Local business owner told me that piece of advise. He started from nothing and is now worth in excess of $130 million. Said paying invoices early on 2/10 Net 30 terms gives you an additional 2% profit in your pocket. You just reduced your cost by 2% simply by paying your bill on time. That reduction in cost will net you about $10,000 additional profit based on $500,000 sales figure. Just for doing what you should be doing- paying your bills on time.

With you being a home based setup like my company, I'll give you a little advise about operations that I learned the hard way being in business over 3 years. You're a one man show. That means you do the sales, customer service, purchasing, marketing, and production all yourself. You need to have people to delegate tasks to. For the small time reloader, you work on production and sales and shipping. Have your spouse work on sales, customer service, and marketing. Your CPA handles accounting. They handle purchasing and manage the company's cash flow. You need financials, production, and sales/CS. Get descriptions for each task on paper and stick to them. Each has their role. Too much of one thing will spell disaster. My wife has absolutely nothing to do with the business and wants nothing to do with it. Never has. I've finally got a CPA doing more than just business taxes and that is one of the smartest moves I made.

A CPA is worth their weight in gold, but never let them know that.:D

Wish ya the best of luck. This business is a lot tougher on the inside than outside. Don't quit your day job. Everything looks good on paper. Go give 'em hell!:cool:

oddjob
06-23-2010, 9:53 AM
I tried to write off my last duty gun (bought it myself). My CPA said I had to depreciate it over five years. Then if I sell it I had to claim capital gains. My CPA is very good....too good and honest. My friend got audited back in the days when we had to buy our own kevlar vests. IRS let it go, but asked if the vest was REQUIRED by the dept. My friend said no and the IRS fella said its technically not deductible. But it was a vest and the IRS auditor understood.

Dry cleaning and such: After you exhaust your uniform allowance then you might be able to deduct some. IRS ain't that stupid....they know.
Haircuts: Nope
Duty rifle: See above. If its not REQUIRED by your dept it may not fly.

As others have said. Consult with a CPA.

ZRT650
06-23-2010, 10:04 AM
If you are an LEO and buy an AR for duty use (agency does not reimburse nor issue patrol rifles/carbines), can this count as a legitimate tax write off?

How about dry cleaning if your uniform requires it? Haircuts?

Yes all of the above are legitimate tax write offs if you can prove that they are required for your to properly perform your job. Yes it is definitely also a great way to get audited but as long as you can prove they are legitimate you have nothing to worry about.

Blood Ocean
06-23-2010, 10:36 AM
Guys, I am a CPA and here's my $.02 (no legal opinions here) on business write-offs:

DOCUMENT EVERYTHING - ESPECIALLY INTENT

That is all it takes for you to be in the right. Another factor most people fail to realize is that you won't be itemizing "Guns" on your business tax returns. The business tax return is very simple in nature and you will have to report assets (at a certain point, not getting into it here) you never have to let them know what exactly the machinery or tools you use are. I would be very careful with this specific situation because WHEN you are in tax court it will be the judge who decides whether you have a hobby or business. If you have meticulous records you will be in good shape, the benefit of being self-employed is that what is not deductible for traditional employees (gas to get to work for example) is completely deductible as a business owner. If anyone has specific questions PM me and I'll be glad to help within reason, but it's not good business to give away for free what you could charge an arm and leg for ;)

azn_wrx
06-23-2010, 3:09 PM
If you have access to RIA, CCH, or Lexisnexis you could do some research on tax cases to see how the court has ruled under similar circumstances.

ZRT650
06-23-2010, 6:12 PM
Guys, I am a CPA and here's my $.02 (no legal opinions here) on business write-offs:

DOCUMENT EVERYTHING - ESPECIALLY INTENT

That is all it takes for you to be in the right. Another factor most people fail to realize is that you won't be itemizing "Guns" on your business tax returns. The business tax return is very simple in nature and you will have to report assets (at a certain point, not getting into it here) you never have to let them know what exactly the machinery or tools you use are. I would be very careful with this specific situation because WHEN you are in tax court it will be the judge who decides whether you have a hobby or business. If you have meticulous records you will be in good shape, the benefit of being self-employed is that what is not deductible for traditional employees (gas to get to work for example) is completely deductible as a business owner. If anyone has specific questions PM me and I'll be glad to help within reason, but it's not good business to give away for free what you could charge an arm and leg for ;)

This!

BKinzey
06-23-2010, 6:16 PM
A lot of it depends on your ability to convince that person on the other side of the table that this is normal for your line of business. If you walk in there and say your testing consists of driving out to the desert and shooting offhand at beer cans maybe not so much. If you can show you have a shooting range and use a Ransom Rest or similar and have a book full of data to show for it you are in much better shape.

The IRS agent who stated it had to be required was wrong. Business cards aren't required for me but they sure are deductible. I'm not required to have a cell phone but given I get jobs most often by word of mouth it's important, and normal, to have one.

Hunt
06-23-2010, 6:59 PM
You had better have a lot of money to try it in Tax Court... if you were buying test barrels maybe...:confused:

I disagree, if you were making match rounds tuned for each manufacturer out of box remington then savage the winchester. Probably wouldn't be too hard to show the difference in performance with each tuned recipe matched to manuf. I have thought of doing this myself. Anyone interested in match ammo tuned for your out of box rifle?

Ron-Solo
06-23-2010, 11:03 PM
If you are an LEO and buy an AR for duty use (agency does not reimburse nor issue patrol rifles/carbines), can this count as a legitimate tax write off? Yes

How about dry cleaning if your uniform requires it? YES

Haircuts? NOPE



Last I heard you (LEO) can deduct 1 firearm per year, but that may have changed.

freespool
06-25-2010, 11:11 PM
I've never been through an audit so I don't know how much discretion can be applied by the auditor. If you're making money after expensing the guns - I suppose it's depreciating them - and over time the amount of profit looks good in comparison to the expenses, I can't see that there would be a basis for gainsaying expenses that can be reasoned to contribute to the success of the business.

I think an interesting angle is what happens later. A big difference between guns and say, copy machines that become worthless eventually, is that the guns don't depreciate much economically even though you depreciate them in your accounting. When you sell them for more than their depreciated accounting value - which goes to zero eventually - you have a taxable profit. In theory there's not much of a free tax lunch with business assets that hold their economic value (home and furnishing depreciation in a room rental context is one nice exception to that rule) - you get the expense deduction now but you pay the gains tax later - but I'm sure there are ways to get around that. Time and the statute of limitations are your friends.

maxwellca21
06-25-2010, 11:32 PM
Great way to get audited!

what this guy said.