SECTION 10. REQUEST FOR

COMMENTS

We welcome comments regarding this revenue procedure. We specifically request comments concerning two issues:

Question and Answer 32 of this revenue procedure describes one reasonable method for determining the value of demonstration automobiles, an annual look back at the average sales price of all vehicles sold in the prior calendar year, for purposes of applying the daily inclusion value table under the partial exclusion method. Comments are specifically requested regarding the usefulness of specifying additional reasonable methods, including:

December 17, 2001 600 2001-51 I.R.B.

• A method basing the daily inclusion amount on an annual look back at the average sales price of only those vehicles used as demonstration automobiles in the prior year. For example, an employer has a full-time sales staff of six employees. During January, the employer reviews the permanent records of all vehicles sold during the prior year. This review identifies 38 vehicles that were sold as new vehicles with over 1,000 miles on the odometer at the time of sale. Totaling the price for which the 38 vehicles sold and dividing by 38 results in an average value of $26,980. For each month from February 1 of the present year to January 31 of the next year, the employer includes in each of the 38 full-time salesperson’s gross income the amount from the table based on that value for each day in the month.

• A method basing the daily inclusion amount for each employee on the value of the specific demonstration automobiles provided to the employees for the month; in particular where records identifying which salesperson is provided which vehicle are already maintained pursuant to the simplified out/in method under the full exclusion.

Question and Answer 51 allows employers to correct errors identified in the calendar year during the calendar year. Comments are also specifically requested regarding the need for more detailed correction procedures where errors are identified preventing the employer from satisfying the requirements for the simplified methods under this revenue procedure.

Comments regarding this revenue procedure should be sent by March 1, 2002, in writing, and should reference Rev. Proc. 2001–56. Comments can be addressed to:

stances, with an estimated average of 5 hours. The estimated number of recordkeepers is 20,000.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

APPENDIX A

MODEL QUALIFIED WRITTEN POLICY FOR FULL EXCLUSION

[INSERT NAME OF DEALERSHIP]

DEMONSTRATOR VEHICLE POLICY

This policy statement is designed for use by dealers that wish to adopt the out/in or partial exclusion methods of accounting for use of demonstrator vehicles provided to full-time automobile salespeople. It may also be used to explain the full inclusion method for vehicles provided to employees other than full-time automobile salespeople .

Material in italics explains how to use the policy and should be deleted from the policy provided to employees and main- tained by the dealership. Material in bold is optional and should be included only if it reflects the choices made by the dealer- ship. Material IN CAPITALS is informa- tion that is specific to the dealership— the dealership should insert the appropri- ate information.

Because the optional language in this model provides for specifying the amount included in employee income, any dealer adopting that language should review the model annually to determine if inclusion amounts have changed; if the inclusion amounts have changed, the dealer should modify the policy to reflect the change and reissue it to employees provided dem- onstration automobiles.

Full-time automobile salespeople at

[INSERT NAME OF DEALERSHIP] and certain other employees may be provided with the use of a demonstration vehicle. We want you to understand the restrictions on use of demonstration vehicles and how employees who use demonstration vehicles will be taxed on that use.

CC:ITA:RU (Rev. Proc. 2001–56),

room 5226 Internal Revenue Service POB 7604, Ben Franklin Station Washington, DC 20044

Comments also may be hand delivered between the hours of 8 a.m. and 5 p.m. to:

CC:ITA:RU (Rev. Proc. 2001–56) Courier’s Desk

Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC.

Alternatively, taxpayers may transmit comments electronically via the following email address:

Notice.Comments@m1.irscounsel. treas.gov