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We have friends with two kids both over 21. The older "child" has worked for several years and has been able to save $. She uses her car a lot for work and needs a new car; she's also looking into buying her first home (a small home or condo) as her primary residence. She needs a new car now but the condo purchase will take 3 to 6 months.

The older daughter is concerned that having a car loan on her record will effect her debt ratio or credit score and thereby effect the condo purchase. The idea is to have the younger daughter purchase the car for the older daughter to use 100% of the time to avoid showing this debt on the older daughters record.

Well, that's fraudulently understating liabilities on a mortgage application, but that doesn't seem to tweak anybody's conscience, or at least you failed to mention that part. But hey, everybody does it these days. Signs of the times.

The question is can the older daughter still "write off" the use of the new car even though she isn't the legal owner? She's paid via 1099's if that matters.

No tax problems with that. Older Daughter will be incurring the actual costs, and can call it a lease from Younger Daughter. She doesn't have to own the car. She can't take actual depreciation, but can take standard mileage at 56¢/mile for a leased or rented car. OR the actual lease payments to Younger Daughter, plus operating costs. (For actual business mileage, as a percent of the total.)

any thoughts about insurance issues?

Is the younger daughter who buys the car going to acknowledge that the vehicle will be used for business purposes? If there's an accident while on business, will they be covered? If not, do you have a fraudulent policy application?

For these friends, I wouldn't want to be a close advisor - at least, not quoted as such.

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