October 4, 2002

To:                  Dealer / General Manager / Controller / Office Manager

From:                  Carl Woodward

Subject:            Demonstrators and the IRS

            I have included a revised demonstrator agreement and demonstrator mileage log. The IRS wrote a new revenue procedure late last year. This procedure gives guidance on demonstrators for new vehicle dealerships. As you know, users of demonstrators in the past were supposed to keep mileage logs to support the business versus personal use of demonstrators. This new procedure gives an alternative for those sales department employees that do not keep mileage logs. For these employees, if they meet certain guidelines on the use of the demonstrator, but do not keep mileage logs, they are given an amount they must pay for the use of the demonstrator based on the value of the vehicle.  Basically if you supply a vehicle worth from $ 15,000 to $ 29,999, the charge for this group of sales department employees would be $ 6 a day, or $ 180 per month.

            Please feel free to use the attached demonstrator agreement and mileage log and share it with other dealers. Please call me if you need a more detailed explanation of your demonstrator policy and the IRS.

Carl Woodward

Our best email address is       woodwardassoc@cpaauto.com

Please feel free to contact us at this email address.