Sleeper Alert! – IRS GLAM Re: Auto Dealer Facility Upgrade

Seemingly out of nowhere, the IRS released Legal Advice on the taxation of auto dealer facility image upgrade payments to dealers. It comes as no surprise that the IRS concluded that these payments are includable in a dealership’s gross income under Section 61.

What comes as somewhat a surprise – at least to me – is that out of all the CPAs I know, none have told me about any ongoing audits where this issue has been raised. Has an IRS agent mentioned this in any of your auto dealership audits yet?

Significantly, this guidance from the IRS has no precedential value … but it certainly lets us know what to expect.

If a dealership has not already filed its tax return for 2013, this holding from the IRS should be considered for its implications both for the dealership and for the CPA signing the return as preparer.

Be forewarned, there is a huge “sleeper” in this GLAM that could result in penalties if payments under certain Factory plans are not properly accounted for.

This GLAM is dated April 7, but was just released yesterday (May 15, 2014).

Full text of the GLAM