$7,500 Tax Credit Question

[jbumps]

Hi all,

Does anybody know if I can add my mom to our Model X registration and allow her to take the $7500 credit? We both live in the same house, and I expect to have very little tax liability. She however will have almost the entire $7500 worth of liability. Can it work this way? Thanks so much!

Even if your mom contributed towards or made the payment (assuming there is one), the insurance, electric bill, etc... the answer is no. Absent being a party to the original title/acquisition paperwork, she's not eligible to claim it. Adding her to the title or the registration would be a wasted effort - the measuring stick document is the MSO/MCO, which wouldn't be effected by the after the fact changes you've proposed. In an audit situation, the MSO/MCO would not feature her signature and that would be the end of it.

As a CPA, I wouldn't encourage you to attempt it (more because it's against the intent of the credit than it is that you're likely to get caught), given the fact that there are other options that allow you to create extra liability and subsequently capture it yourself.

 

[Brandon332]

Even if your mom contributed towards or made the payment (assuming there is one), the insurance, electric bill, etc... the answer is no. Absent being a party to the original title/acquisition paperwork, she's not eligible to claim it. Adding her to the title or the registration would be a wasted effort - the measuring stick document is the MSO/MCO, which wouldn't be effected by the after the fact changes you've proposed. In an audit situation, the MSO/MCO would not feature her signature and that would be the end of it.

As a CPA, I wouldn't encourage you to attempt it (more because it's against the intent of the credit than it is that you're likely to get caught), given the fact that there are other options that allow you to create extra liability and subsequently capture it yourself.

Thanks @jbumps . If you have any ideas off the top of your head to incur extra liability I'd love to hear them I'm 23, make $50k a year and work at a startup where significant costs can be written off due to the nature of the work. So liability is badly needed (the irony =) )

 

[BluestarE3]

Unfortunately, the tax year is over, so there's nothing you can do pro-actively at this point (like the aforementioned Roth IRA conversion) to increase your 2016 taxable income.

 

[cpa]

Even if your mom contributed towards or made the payment (assuming there is one), the insurance, electric bill, etc... the answer is no. Absent being a party to the original title/acquisition paperwork, she's not eligible to claim it. Adding her to the title or the registration would be a wasted effort - the measuring stick document is the MSO/MCO, which wouldn't be effected by the after the fact changes you've proposed. In an audit situation, the MSO/MCO would not feature her signature and that would be the end of it.

As a CPA, I wouldn't encourage you to attempt it (more because it's against the intent of the credit than it is that you're likely to get caught), given the fact that there are other options that allow you to create extra liability and subsequently capture it yourself.

And as another CPA, I agree wholeheartedly with the above.

Now, if we could only get the moderators to form another subforum entitled, "Income Tax Advice and Questions."

 

[daniel]

Nothing I suggested was tax fraud. I didn't suggest "trying to get away with it". I was just stating that the IRS doesn't cross check the EV form with the names on the titles of the VINs submitted.

But they do check the VINs to be valid EVs/hybrids and also check that the VINs haven't been claimed already. So no, you can't just "make up a VIN" for a car that doesn't exist -- which clearly IS tax fraud.

The only thing I suggested was that if the name on the IRS form matched ONE name on the title (and you're the first owner and it wasn't after the fact) that that seems to be a valid condition of claiming the tax credit.

I'm a bit confused here. You say the IRS doesn't cross check the EV form with the names on the titles of the VINs submitted. That was in the context of questions as to whether it was legal or not for a certain person to claim the tax credit. If it's legal for that person to claim the credit, then whether or not the IRS checks the names is irrelevant. The only time it would be relevant whether or not the IRS checks the names is if someone is planning on make a claim which they are not entitled to.

I don't know how the rule would apply in this case. Everyone here is just speculating. Which is why a qualified tax accountant or the IRS itself should be consulted. Since the OP has no income, he probably is not using a tax accountant. So that leaves the IRS, who will categorically answer the question for the OP, if he calls and asks, leaving no doubt. You really don't want to leave your mother in the position of having to justify to the IRS why she claimed a tax credit on a car she did not buy. Much better to call the IRS and ask.

 

[HankLloydRight]

The only time it would be relevant whether or not the IRS checks the names is if someone is planning on make a claim which they are not entitled to.

Wrong. The reason I included that was if the title had two names (owners) on it, but the tax credit was claimed by just one of those names, it would not cause a conflict.

 

[SageBrush]

And as another CPA, I agree wholeheartedly with the above.

Do you agree with the notion that an original title with two owners is a legal circumvention that allows either owner to claim the credit ?

I"m also in OP's position of buying a car with savings and having low tax liability. My son, on the other hand, has lots of tax liability and I'm sure would not mind co-owing a Tesla ;-)
As an added wrinkle though, we live in different states and I would also like to claim the Colorado tax credit.

 

[jbumps]

Do you agree with the notion that an original title with two owners is a legal circumvention that allows either owner to claim the credit ?

I"m also in OP's position of buying a car with savings and having low tax liability. My son, on the other hand, has lots of tax liability and I'm sure would not mind co-owing a Tesla ;-)
As an added wrinkle though, we live in different states and I would also like to claim the Colorado tax credit.

Not the one you asked, but I'll be curious what @cpa thinks. There is little guidance relative to this point, largely because the folks that administer these programs rarely think one foot outside of the box and don't account for these type of exceptions. If I were counseling you as your accountant, I'd advise that the individual that claims the credit is your election to make. That said, I would not advocate one individual claiming the state credit and one claiming a federal.

It's my opinion (I have no precedent to back it up, just my expectation of how either entity would react) that you'd face an uphill battle in an audit if the two weren't claimed by the same person. Caveat is that it's quite unlikely that the IRS would investigate (nor have the justification to do so) sufficiently to vouch to a state return (different one) filed by someone else. I believe it to be marginally more likely that at a state entity might dig in the reverse direction far enough to see it wasn't claimed on a federal return, but still very unlikely.

Takeaway - I think there's little issue with the election as to who claims it, but splitting federal and state under the terms posed would not be in 'good faith' as it relates to the intent of either credit/rebate. There are some significant liability concerns that come with this proposal, but you didn't ask about that and I won't preach

 

[jbumps]

Thanks @jbumps . If you have any ideas off the top of your head to incur extra liability I'd love to hear them I'm 23, make $50k a year and work at a startup where significant costs can be written off due to the nature of the work. So liability is badly needed (the irony =) )

Every year I grow more confident that 'this will be the year I don't get a question that I've never even remotely considered'. With that question, you've ensured the streak will live on. I've got nothing for you, off the top of my head. I'll see what I can come up with that isn't 'creative' to the point of crossing the tax avoidance/tax evasion line.

 

[daniel]

Wrong. The reason I included that was if the title had two names (owners) on it, but the tax credit was claimed by just one of those names, it would not cause a conflict.

If it does not cause a conflict, then it's irrelevant whether or not the IRS checks. The only time it would be relevant whether or not the IRS checks is if the claim would be regarded as improper.

 

[HankLloydRight]

I don't know why you keep trying to imply that I was suggesting tax fraud.

If it does not cause a conflict, then it's irrelevant whether or not the IRS checks.

Your statement is self contradictory. Since you still don't get it, I was talking about the IRS checking the names on the title versus the name claiming the tax credit, and whether or not THAT causes a conflict at the IRS. Someone could simply ask "if the car is titled in two names, but just one person claims the tax credit, will that cause a conflict at the IRS?". The answer is simply "NO". No tax fraud intended or implied.

he only time it would be relevant whether or not the IRS checks is if the claim would be regarded as improper.

This is also not true. The IRS performs thousand of internal consistency checks on every return, and if anything pops out, you will probably get a letter asking for clarification. That doesn't happen "only when something would be regarded as improper."

I explained multiple times what I meant, but it seems no matter what I say, you're still going to push the issue. Just drop it already.

 

[Hitman007]

Wow! So much tongue wagging over a simple question. Only the person who's name is on the purchase order/completed sale paperwork can take the tax credit. Next...

 

[cpa]

Not the one you asked, but I'll be curious what @cpa thinks. There is little guidance relative to this point, largely because the folks that administer these programs rarely think one foot outside of the box and don't account for these type of exceptions. If I were counseling you as your accountant, I'd advise that the individual that claims the credit is your election to make. That said, I would not advocate one individual claiming the state credit and one claiming a federal.

It's my opinion (I have no precedent to back it up, just my expectation of how either entity would react) that you'd face an uphill battle in an audit if the two weren't claimed by the same person. Caveat is that it's quite unlikely that the IRS would investigate (nor have the justification to do so) sufficiently to vouch to a state return (different one) filed by someone else. I believe it to be marginally more likely that at a state entity might dig in the reverse direction far enough to see it wasn't claimed on a federal return, but still very unlikely.

Takeaway - I think there's little issue with the election as to who claims it, but splitting federal and state under the terms posed would not be in 'good faith' as it relates to the intent of either credit/rebate. There are some significant liability concerns that come with this proposal, but you didn't ask about that and I won't preach

My take would be to do a little more digging before deciding who takes the credit. If Mom provided most or all the money, then by all means, have Mom take the credit. (Follow the money.) I would also determine who drives the car, who pays the insurance and tags. I might also consider how many autos are in the household, and who drives which vehicles.

Jbumps is right: there is not a lot of guidance on this matter. But let me put on my auditor's hat: My curiosity would be raised when I saw two names on the title. I do not think it is that common for joint title on a car with a parent and an adult child. I would ask to see the purchase agreement. I would ask to see a copy of the canceled check, and I would ask to see a copy of the co-owner's tax return. If the facts are as stated in the original thread, then I would disallow the credit and tack on the negligence penalty under 6662. Then, I would issue the 30-day letter and let Appeals deal with it.

Caveat: I have never worked for the IRS. I have performed financial statement audits (different beasts) and did some fraud investigations in a former life. I also wear both a belt and suspenders.