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Taxability of Demonstration Automobiles Leaves Many Questions Unanswered

May 25, 2001

Although dealer-provided demonstration automobiles for full-time salespersons is a non-taxable benefit, there are enough restrictions in the regulations that proper compliance has become difficult for auto dealers and their employees.

Crowe, Chizek and Company LLP, on behalf of Auto Team America, has joined with O'Conner & Drew PC and the National Automobile Dealers Association in taking the lead to question specific aspects of the rule.

The Internal Revenue Service and Treasury Department have accepted the group's Industry Issue Resolution (IIR) submission on the issue of taxability of demonstrator automobiles provided to salespersons. One of the anticipated benefits of the IIR pilot program is to eliminate uncertainty regarding tax treatment.

The IRS currently is investigating this issue and is working to provide a document by the end of the year that will provide guidance to dealers on how to handle demo vehicles, according to Crowe Chizek.

About Crowe, Chizek and Company LLP

Crowe, Chizek and Company LLP (www.crowechizek.com) provides business solutions for assurance, consulting, e-business, financial and human capital, outsourcing, tax and technology.

Founded in 1942, Crowe Chizek is a top 10 U.S. accounting and consulting firm offering client-focused services through nearly 1,400 professionals in 12 offices.

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