Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board
Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board
elated entity, business organization, association, or individual in regard to the sale of any extended service or credit life contract? l. Did you file any Forms 3115 to elect the Service Warranty Income Method (SWIM)? m. Did the corporation/partnership, any related entity, business organization, association, or individual file a Form 1120-L or Form 1120-PC? n. Please provide a copy of all contracts related to all extended service contract plans. 13. Advertising a. What type of advertising do you do? b. Do you belong to an advertising co-op, pool, or association? c. Does this co-op, pool, or association file a tax return? d. Do any funds revert to officers, shareholders or partners or related parties? e. Who determines the per car advertising amount for the co-op, pool, or association? Is participation mandatory or voluntary? 14. Demonstrator vehicles (Since 1989), need IRC section 274(d) substantiation. a. Do you have demonstrator vehicles available for use by any officer, shareholder, partner, relative of these same or any employees? If yes, provide a list of individuals who have demonstrators and their relationship to the dealership. b. Do you maintain agreements for such use? Provide copies. c. Sample the substantiation. 15. Items to request or remember a. Get copies of all related returns affecting all years of examination. b. Is the current year dealership return filed? c. What Federal returns is the dealership responsible for? Are these returns filed? Excise Tax, 720? Small casualty or life, Form 1120-L or Form 1120-PC? d. Ask for copies of Forms 940, 941, W-2, 1099 and the appropriate state tax returns, i.e. California’s Form DE-3. (Determine how shareholder is compensated.) e. Corporate minutes; by-laws. A-6
f. Employee Benefits 1) Form 5500? 2) Determination letter? 3) Payment? g. Rent: Related parties? Disguised dividends? h. Forms 8300 1) Did you receive any payments over $10,000, as defined for purpose of compliance with the requirements of Form 8300, for the years in question? 2) Did you file all necessary Forms 8300? 3) Are you aware of the definition of cash? (Cash, traveler’s checks, cashier’s checks. "Any monetary instrument whether or not in bearer form." Form 8300 instructions.) i. Prior audits; individuals; entities? Get copies of relevant correspondence, RARs, etc . j. Copies of all Forms 3115 filed by the dealerships or any related entity. 16. Additional questions to cover the following areas and associated issues should be developed where appropriate: a. LIFO conformity (manufacturer statements, creditors, owners) b. Extent and degree of LIFO comparability (coordinated issue) c. IRC section 263A organizational chart identifying job positions and descriptions d. Write downs (accuracy and validity per Treas. Reg. sections 1.471 et. al., Thor Power, Rev. Rul. 67-107) e. Existence and economic substance of intangibles, e.g. Covenant not to compete f. Existence and sale of receivables to a related finance company g. Existence and flow of funds to a producer-owned reinsurance company (does not have to be offshore) h. Types and tax treatment of all sales transactions (deferrals, liabilities) A-7
- Page 131 and 132: Where a covenant may be enforced it
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- Page 137 and 138: RELATED FINANCE COMPANY CHECKSHEET
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- Page 141 and 142: 3. Question the taxpayer directly w
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- Page 145 and 146: Technicalities Under the provisions
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- Page 149 and 150: Cash 300 Accounts Receivable 300 2.
- Page 151 and 152: The dealer sells the note to a fina
- Page 153 and 154: For purposes of this rule, an "empl
- Page 155 and 156: 10) relationship of stockholder-off
- Page 157 and 158: purely for services. See Treas. Reg
- Page 159 and 160: Howard Sole, Inc. v. Commissioner,
- Page 161 and 162: Milford Motor Co. v. United States,
- Page 163 and 164: new pool for additional, subsequent
- Page 165 and 166: 6. The finance company is entitled
- Page 167 and 168: when the back-end distributions are
- Page 169 and 170: The transfer of the installment con
- Page 171 and 172: Report as a Loan or an Assignment
- Page 173 and 174: Reported as a Sale… (How it Shoul
- Page 175 and 176: Other Sources of Information IRC se
- Page 177 and 178: Part 4 Appendices Appendix A Initia
- Page 179 and 180: 2) Adjusting Journal Entries 3) Tax
- Page 181: k. Do you receive rebates from anyo
- Page 185 and 186: Appendix B Balance Sheet Section -
- Page 187 and 188: . Dealership financing If the deale
- Page 189 and 190: f. Dealer Reserve Holdbacks 3. Inve
- Page 191 and 192: Once the existence of a shareholder
- Page 193 and 194: Despite the fact the computation ma
- Page 195 and 196: corporate minutes if material. d. L
- Page 197 and 198: Appendix C Definition of an Item Co
- Page 199 and 200: two cars of the same model can vary
- Page 201 and 202: Appendix D An Analysis of the Wrigh
- Page 203 and 204: (D) also moved (DLRS) income to be
- Page 205 and 206: The court did not allow (D)’s cla
- Page 207 and 208: Appendix E Glossary The following t
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elated entity, business organization, association, or individual in regard to the sale of any<br />
extended service or credit life contract?<br />
l. Did you file any Forms 3115 to elect the Service Warranty Income Method (SWIM)?<br />
m. Did the corporation/partnership, any related entity, business organization, association, or<br />
individual file a Form 1120-L or Form 1120-PC?<br />
n. Please provide a copy of all contracts related to all extended service contract plans.<br />
13. Advertising<br />
a. What type of advertising do you do?<br />
b. Do you belong to an advertising co-op, pool, or association?<br />
c. Does this co-op, pool, or association file a tax return?<br />
d. Do any funds revert to officers, shareholders or partners or related parties?<br />
e. Who determines the per car advertising amount for the co-op, pool, or association? Is<br />
participation mandatory or voluntary?<br />
14. Demonstrator vehicles (Since 1989), need IRC section 274(d) substantiation.<br />
a. Do you have demonstrator vehicles available for use by any officer, shareholder, partner,<br />
relative of these same or any employees? If yes, provide a list of individuals who have<br />
demonstrators and their relationship to the dealership.<br />
b. Do you maintain agreements for such use? Provide copies.<br />
c. Sample the substantiation.<br />
15. Items to request or remember<br />
a. Get copies of all related returns affecting all years of examination.<br />
b. Is the current year dealership return filed?<br />
c. What Federal returns is the dealership responsible for? Are these returns filed? Excise<br />
Tax, 720? Small casualty or life, Form 1120-L or Form 1120-PC?<br />
d. Ask for copies of Forms 940, 941, W-2, 1099 and the appropriate state tax returns, i.e.<br />
California’s Form DE-3. (Determine how shareholder is compensated.)<br />
e. Corporate minutes; by-laws.<br />
A-6
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