SECTION 6. SIMPLIFIED METHOD

FOR INCLUSION OF THE VALUE OF DEMONSTRATION AUTOMOBILE IF NEITHER FULL NOR PARTIAL EXCLUSION APPLIES

Q–40. What method does an employer use to account for the use of demonstra- tion automobiles provided to employees who are not full-time salespeople?

A–40. If the employee provided the use of a demonstration automobile is not a full-time salesperson, the full exclusion and the partial exclusion in this revenue procedure do not apply. To reduce record keeping with respect to use of a demonstration automobile by an employee who is not a full-time salesperson, the employer may include in the employee’s income and wages each month the full value of the demonstration automobile determined with no reduction to take into account business use (the “full inclusion method”). See Questions and Answers 43 through 45 below which discuss the use of the annual lease value table to determine the amount included under this method.

Of course, other methods for excluding from an employee’s income a portion of the value of the use of an employerprovided automobile remain available for those employees that are not full-time salespeople. Specifically, see Questions and Answers 48 through 50 below regarding the application of Treas. Reg. § 1.274–6T. Section 1.274–6T generally allows an employer implementing certain written policies restricting personal use to account for commuting and de minimis personal use by any employee by including the $1.50 per one-way commute provided under Treas. Reg. § 1.61–21(f)(3) in the employee’s income and providing other evidence allowing a determination that use was actually limited.

Q–41. What method is used to account for the use of a demonstration automobile by a full-time salesperson who does not qualify for the full exclu- sion or partial exclusion?

December 17, 2001 598 2001-51 I.R.B.

For ease of reference, the following table provides the daily inclusion amount under the annual lease value table.

Value of Demonstration Automobile Daily Inclusion Amount $0–2,999 $3 3,000–4,999 4 5,000–5,999 5 6,000–7,999 6 8,000–8,999 7 9,000–10,999 8 10,000–11,999 9 12,000–12,999 10 13,000–14,999 11 15,000–15,999 12 16,000–17,999 13 18,000–18,999 14 19,000–20,999 15 21,000–21,999 16 22,000–23,999 17 24,000–24,999 18 25,000–25,999 19 26,000–27,999 20 28,000–29,999 21 30,000–31,999 23 32,000–33,999 24 34,000–35,999 25 36,000–37,999 27 38,000–39,999 28 40,000–41,999 29 42,000–43,999 31 44,000–45,999 32 46,000–47,999 34 48,000–49,999 35 50,000–51,999 36 52,000–53,999 38 54,000–55,999 39 56,000–57,999 40 58,000–59,999 42 For vehicles with value in excess of $59,999, the dollar inclusion amount is (.25 x value) + $500, divided by 365, rounded

to nearest dollar amount.

b. Evidence that the amount was timely included in the employee’s income and wages. For example, copies of wage statements showing inclusion of the amounts no less often than monthly.

Q–47. What records must an employee maintain to satisfy the require- ments for the full inclusion method?

A–47. No records must be maintained by an employee under the full inclusion method.

Q–45. Under the full inclusion method, how does an employer deter- mine the number of days that an employee has the use of a demonstration automobile?

A–45. Absent evidence to the contrary, employees provided the use of a demonstration automobile are assumed to have the use of the automobile for every day (including non-workdays) of the period under consideration.

Q–46. What records must an employer maintain to satisfy the require- ments for the full inclusion method?

A–46. An employer must maintain the following records to satisfy the requirements for the full inclusion method—

a. Adequate records supporting the determination of the value of the demonstration automobile provided to the employee. For these purposes, records identified above in the description of the deemed reasonable method for determining value will be considered adequate.

2001-51 I.R.B 599 December 17, 2001