Hi. I need some help here. I have a client who has filed a Schedule C and has been taking actual expenses on his vehicle. He has now formed an S-Corp with another shareholder, and the S-Corp adopted an accountable plan which reimburses shareholders for business use of their vehicle using the IRS standard mileage rate. Is this something that is going to cause a problem? I know you cannot use the standard mileage rate if you:

• Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS,
• Claimed a Section 179 deduction on the car,
• Claimed the special depreciation allowance on the car,
• Claimed actual car expenses after 1997 for a car you leased,

Obviously, its not the same taxpayer who claimed actual expenses but is now claiming the SMR. But can he be reimbursed this way by the S-Corp?

It may be relevant to note that the S-Corp was formed mid-year, and the Schedule C that will be filed to account for the shareholder's business activities prior to the creation of the S-Corp will necessarily include his vehicle expenses for the period prior to the S-Corp. He also took bonus depreciation on this auto.