Welcome back! Ask questions, get answers, and join our large community of tax professionals.
  • Sign In
  • Created with Sketch. It is being reported that major internet and cell service providers Verizon, ATt&T, T-Mobile, as well as some smaller local providers are experiencing a massive outage across the United States. This will impact the ProSeries program in regards to customer receiving MFA codes, as well as messages indicating ProSeries is not connected to the Internet.
    cancel
    Showing results for 
    Search instead for 
    Did you mean: 

    Dealer Auto "Day Rental"

    Tenn Jeff
    Level 2

    What is the correct tax treatment for industry practice of "day rental" of inventory vehicles by auto dealer:  (1) reduction in basis or (2) recognition of rental income with depreciation of vehicle?  

    0 Cheers

    This discussion has been locked. No new contributions can be made. You may start a new discussion here

    4 Comments 4
    IRonMaN
    Level 15

    If they hold vehicles specifically identified as rental vehicles, they get depreciated.  


    Slava Ukraini!
    Tenn Jeff
    Level 2

    Thank you.  I agree with you, but they hold the vehicles in inventory - for sale - but, strangely, engage in day rentals.  A bizarre hybrid status.  It is alleged this is a common practice in the industry.  Thanks again.  

    IRonMaN
    Level 15

    Then you have rental income and no direct offsetting expense.  The "expense" will come later when they will potentially get a reduced selling price for the vehicle somewhere down the road.


    Slava Ukraini!
    Tenn Jeff
    Level 2

    Therefore, no depreciation because this is "inventory property" and not "property used in a trade or business" which would be subject to depreciation.  Good point.  Still, as you say,  the income must be declared.  Appears that we talking about the dealer's "intent" in holding the property - for sale or for rent.    

    So the sale price later would be reduced by direct selling expenses and that is all.  This purported industry practice of reducing basis (by the rent) and not reporting the rent income is, by all appearances, smoke and mirrors.     

    Thanks again.