For participants
The documents you receive, where to find the operator's records on your equipment, and a template for keeping your own notes. One place, so everything is easy to hand to your accountant.
Records, not tax advice
This page provides documents and record locations, not tax advice, and nothing here is a guarantee of any tax outcome.
We do not prepare returns, we do not file, and we do not determine your tax position. Which tax treatment applies to you, and what any record does or does not support, is determined solely by your own CPA or tax advisor based on your specific situation. Cochran Management LLC is not your tax advisor. Confirm any tax position in writing with your own advisors before relying on it.
Your closing and annual file
These come from us or the operator. If anything on this list is missing from your file, tell me and I will get it.
Your LLC's ownership of specific, serialized equipment.
The financing terms and the guarantee you signed.
Confirms the date the equipment was in service for your LLC.
The terms under which the operator manages and re-rents your equipment.
Built so your accountant can work from it directly.
Coverage on your equipment.
Inside the equipment platform
The operator's platform keeps dated activity records on your units. Work orders and inspections identify their originator or assignee. These are the operator's system records, not notes recreated later. Pull them whenever you like and at least once before tax time.
Access-code activity on the unit: the action, outcome, requestor field, and timestamp.
Every work order on your equipment, with its ID, description, originator, assignment, and dates.
Inspection records with IDs, assignee, submitted and completed dates, and pass or fail detail.
Machine hours attributed to each access code you have issued.
One thing to know:the tab labeled “Time Card” reports the machine's engine run time. It is not a record of any person's hours. Do not treat it as one.
A technical program briefing
This overview is prepared for a tax professional. It describes the ownership structure, the limitations that affect whether a deduction is usable, and the questions that belong to your CPA.
Give it to them early rather than at filing. The threshold question below is unsettled, and it is better answered before a purchase than after one. Your accountant may also want a reasoned written opinion from independent tax counsel addressed to your own facts — that is a different document from this briefing, and not one we can supply.
Download the CPA briefing (PDF) →If your accountant wants records kept in a particular way, follow their direction. They know your situation.
A blank equipment activity record
A calendar entry, business-system note, or email made when something happens may already be the most natural contemporaneous record. Use what you already have if you can.
The downloadable workbook is a notebook, not a calculator. It has no targets and does not decide what any entry means. That determination belongs to your accountant.
Download the activity record (Excel) →Structure, not a conclusion
Whether a first-year deduction can offset your other income is not one question. It is three, applied in this order on the return. We are describing the structure so you and your accountant can talk about the right one — not telling you how any of them comes out for you.
Is there enough at-risk basis — cash plus debt you are personally liable for — to allow the loss at all?
Is the loss non-passive, so it can reach income from other sources? This is the unsettled one.
An annual cap on how much net business loss can offset non-business income; anything above it carries forward.
The second one is genuinely unsettled, and it turns on a question that comes before your own involvement. Under §469(c)(2) a rental activity is passive regardless of how much the owner does. An activity escapes that label if the average period of customer use is seven days or less (Treas. Reg. §1.469-1T(e)(3)(ii)(A)), and on the operator's own telematics the average equipment rental runs far longer than that. The argument advanced is that what you own is your own re-rental business rather than a rental activity — and no controlling authority has been identified applying that framing to a managed fleet like this one.
Why that matters to you before anything else: if the activity is a rental activity, the loss is passive and your own involvement does not change it. Your records are still worth keeping — they are the operating history of a business you own — but the threshold question belongs to your CPA and tax counsel, and it is not one we take a position on.
Worth raising with your advisor
The unsettled question above only matters on one route. Nothing about owning the equipment requires taking a non-passive position on it.
A participant who already has passive income from other sources may be able to treat this activity as passive and apply the loss against that income under §469(a) — which never reaches the threshold question, never depends on material participation, and needs no participation record at all. Losses that are not usable in a year are suspended and carry forward under §469(b), and are freed on a complete disposition to an unrelated party under §469(g). Your accountant may also weigh how each route affects net investment income under §1411, where a passive loss and a non-passive business loss do not behave the same way.
Which route fits — or whether neither does — is your CPA's determination on your facts. We raise it because it is in the briefing we hand your accountant and it belongs in front of you too: the contested question is not the only door, and for some participants it is not the relevant one.
Treas. Reg. §1.469-5T(f)(2)(ii)
We are not going to tell you which of your time counts toward any tax standard, because that is not ours to decide and the answer depends on your facts. But it is worth knowing that the regulations draw a line, so you can keep a record that is useful on either side of it.
Work done in an individual's capacity as an investor is not treated as participation in the activity unless the individual is directly involved in the day-to-day management or operations of the activity. Work done as an investor includes:
- studying and reviewing financial statements or reports on operations of the activity;
- preparing or compiling summaries or analyses of the finances or operations of the activity for the individual's own use; and
- monitoring the finances or operations of the activity in a non-managerial capacity.
Read that alongside your own record and bring both to your accountant. How it applies to you, which standard governs, and whether you meet it are their determinations to make, not ours.
The decisions we cannot make
These are the questions that decide whether this works for you, and they are the ones we cannot answer.
Read the law itself
Everything above describes these; none of it replaces them. If a question matters to your return, the authority is here and your CPA works from it directly.
Passive activity losses and credits — including §469(c)(2), the rule that a rental activity is passive regardless of participation.
What counts as a “rental activity,” and the six exceptions — including the seven-day average-customer-use test at (e)(3)(ii)(A).
The seven material-participation tests, and the rules at (f)(2) on which work counts — including the investor-capacity exclusion quoted above.
At-risk limitation — the first of the three limits.
Excess-business-loss limitation at §461(l) — the third.
Net investment income tax — relevant to how each route above is treated.
The IRS's own plain-language guide to the passive-activity and at-risk rules.
Passive activity loss limitations.
At-risk limitations.
Limitation on business losses.
Bring your advisor
If it would help, I am glad to get on a call with you and your CPA together, or to bring tax counsel onto a call. Anytime at josh@ownafleet.com or call (206) 755-6436.