SECTION 7. APPLICATION OF

GENERAL RULE WHEN METHODS IN REVENUE PROCEDURE ARE NOT USED

Q–48. What is the interaction of the method under Treas. Reg. § 1.274–6T for an employer implement- ing a policy of no personal use except commuting through a written policy with the full exclusion or partial exclusion methods?

A–48. Under Treas. Reg. § 1.274–6T, certain types of written policy statements can be used to implement a policy of no personal use, or no personal use except commuting, of a vehicle provided by an employer. Under the regulation, the employee is not required to keep a separate set of records for purposes of the employer’s substantiation requirements under section 274(d) of the Code with respect to the use of a vehicle satisfying the written policy statement rules. Among the requirements under Treas. Reg. § 1.274–6T for a policy of no personal use except commuting is that the employer reasonably believe there is no personal use except for de minimis personal use in addition to commuting and that the employee does not use the vehicle for any personal use except for de minimis personal use in addition to commuting. Also among the requirements is that there be evidence that would enable the Commissioner to determine whether the use of the vehicle met the requirements.

Generally, in the case of a full-time salesperson, satisfying the requirements of Treas. Reg. § 1.274–6T would satisfy the requirements for the full exclusion under this revenue procedure. Moreover, in the case of a full-time salesperson, the employer would not be required to include an amount in the income of the salesperson representing the value of commuting.

Q–49. What amount of personal use mileage in addition to commuting would satisfy the de minimis personal use in addition to commuting under Treas. Reg. § 1.274–6T ?

A–49. For purposes of Treas. Reg. § 1.274–6T and this revenue procedure, de minimis personal use means personal use during the employee’s commute and in conjunction with business use. In con

trast, the limited personal use permitted under section 132(j)(3) and the full exclusion in this revenue procedure allow the employee to use the vehicle for personal purposes, even if that use involves a departure from the commuting route. Thus, if the employee stops on the commuting route for a personal purpose, that use constitutes de minimis personal use. However, if the employee travels to a location that is five miles away from the commuting route for a personal purpose, that use exceeds de minimis personal use even though it may be permitted under the full exclusion method described in this revenue procedure.

Q–50. What evidence would satisfy the requirement under Treas. Reg. § 1.274–6T that the employer must maintain evidence that would enable a determination whether the use of the vehicle met the requirements?

A–50. Evidence establishing that each salesperson’s personal use by mileage was calculated no less often than monthly would support an employer’s reasonable belief that the vehicle was not used for any personal purpose other than de mini- mis personal use in addition to commuting. For that purpose, the out and in records under the simplified full exclusion method described in section 4 would constitute evidence that would enable a determination that the use of the vehicle met the requirements. Of course, as noted in Question and Answer 49, the additional average 10 miles per day would not be permitted as de minimis use.

Q–51. What amount is included in the income of an employee if the use was not taken into account and included in income for the month in which the use of a demonstration automobile was pro- vided?

A–51. If the error is identified and corrected during the calendar year the demonstration automobile was provided, the amount included may be determined under this revenue procedure. If the error is not corrected during the calendar year in which the demonstration automobile is provided, the amount included is determined under general valuation and substantiation rules.

Example 1. In August, the employer determines that three employees provided the use of demonstration automobiles without limitations on personal mileage (and for whom amounts were included in income and wages under the partial exclusion

method) did not qualify as full-time salespeople since June of that year. Beginning in August, the employer accounts for the use of demonstration automobiles by these three employees using the full inclusion method. In addition, no later than December 31, the employer includes an amount in the three employees’ income that is the difference between the amount that should have been included in their incomes under the full inclusion method for June and July and the amount actually included under the partial exclusion method. With respect to these employees, the employer satisfies the requirements of Question and Answer 51 of this revenue procedure.

Example 2. Two years after a demonstration automobile was provided to an employee, it is determined that the employee was not a full-time salesperson qualifying for the full exclusion or the partial exclusion. The employer did not include any amount in the employee’s income with respect to the demonstration automobile. The amount required to be included in income and wages for the year the vehicle was provided is the full fair market value of the demonstration automobile. If there are not records substantiating the business use of the demonstration automobile, the full fair market value is included without reduction.