[Gixxer]

Hi all,

I have a very satisfying full time job, which just so happens affords me a lot of time off when I'm scheduled to work. In the last few months I have been toying with different ideas for opening a small business, perhaps to subsidize my income, but also pursue something I am passionate about. And on such premise I am turning to the pundits of this board, for some advice.

Am I right to assume that if I incorporate a motorcycle into my business, it then becomes a business expense and I am able to write off all the costs associated with it? Further to this, let's say that I made my motorcycle a mobile billboard, an advertisement for a company...would this classify as a business and could afford the write offs?

Any thoughts on this will be appreciated...maybe I am totally off base...and it'd be good to know sooner than later Thanks

 

[MoneyGal]

The two basic rules to start with are:

1. you must have a reasonable expectation of profit in order to take writeoffs

2. you can only write off the business portion of your costs. If you also derive personal benefit from the expense, you must allocate a portion to non-deductible expenses

So, at a general level, you could likely take some writeoffs against motorcycle expenses, if you have a business which has an expectation of profit and you account for your personal benefit in claiming expenses.

 

[ThickenMyWallet]

MoneyGal is bang on. My only other thought is if you own the motorcycle now, you have a deemed disposition if you move the asset into your corporation so best to speak to an accountant about this.

 

[MoneyGal]

Here's the relevant CRA circular -- see the "special situations" sections.

You will have a deemed disposition / change of use if you already own the asset (motorcycle) and you start using it for business purposes, whether you incorporate or not. If the asset has increased in value, you will have a deemed capital gain (but no deemed capital loss if it has declined in value).

Good luck!

 

[Gixxer]

Thank you for your input. I haven't considered those aspects. Now I am considering how much of a potential income this side business is capable of generating, and how much would the business expenses calculate up to, and is it worth the effort. I guess something I must sit down and contemplate on my own.

Thanks again!

 

[geewilickers]

Here's the relevant CRA circular -- see the "special situations" sections.

You will have a deemed disposition / change of use if you already own the asset (motorcycle) and you start using it for business purposes, whether you incorporate or not. If the asset has increased in value, you will have a deemed capital gain (but no deemed capital loss if it has declined in value).

Good luck!

Hi MoneyGal,

I would just like to say your replies are really helpful and specific, much appreciated.

I have a question as well, what if I have a cell phone I've been using for business before I incorporated. After I've incorporated, can I reclaim/deduct all the previous bills, that I paid before I incorporated? If so is there a limit?

Can you also deduct the actual incorporation itself as an expense? Say you paid $300 to incorporate.

Thanks!

G

 

[Retired at 31]

Hi MoneyGal,

I would just like to say your replies are really helpful and specific, much appreciated.

I have a question as well, what if I have a cell phone I've been using for business before I incorporated. After I've incorporated, can I reclaim/deduct all the previous bills, that I paid before I incorporated? If so is there a limit?

Can you also deduct the actual incorporation itself as an expense? Say you paid $300 to incorporate.

Thanks!

G

If the "business" was operating as a sole prop, then no you couldn't. If you were doing things to setup a business for a reasonable period of time before incorporating and setting up business accounts, then, yes you could deduct the cell phone bills and claim the gst paid.

Incorporation is a not treated as an expense. You'll find it amortized on the balance sheet for posterity - meaning each year you can expense a small portion of it.

Go see someone with letters after their name. Good advice is something you shouldn't shoestring.