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Apologies in advance, not sure where else to ask this question and hoping for some thoughts.  We do not have a CFO, I'm currently a VP and leading our Contracts, Legal, and Finance/Accounting Departments, so I figured I would ask here first prior to engaging a consultant.

My company recently created an Executive Automobile Allowance Policy, which is non-accountable, and provides C level executives a flat amount of $ per month as a perk to use towards person vehicle ownership, if they so choose.  Three executives have leases that are under the company name and paid by the company, so we are transferring those to the employee and they will be responsible for the payment, insurance, etc.  That's the easy part.

Problem, the CEO recently purchased a vehicle and the company wrote a check and paid in full and it's now an asset (as of 1 month ago).  I'm looking for a recommendation on how to handle this with the CEO so that it's fair with the other C level executives.

My thoughts are:

1. I can keep the vehicle owned by the company and have the CEO removed from receiving the monthly allowance.  However, I'm concerned about keeping the vehicle on our insurance and having him drive for liability purposes.

2. If we transfer the vehicle to the CEO (which is fully paid off), that's essentially an advance, or equity draw?  If we did that, how would the financial aspect be worked out?

3. Other options I'm unaware of?

 

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Was the vehicle's purchase by the corporation for the CEO reported as taxable compensation at year-end? If it was, then the transfer should be noncompensatory. If not, why not? I mean, the corporation took a deduction against taxable income for the expense, right?

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Is this something not covered by your company's Cost Accounting Disclosure Statement? Are you seeking to determine allowable cost under cost accounting standards or is this just a general business question?

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3 hours ago, CHILINVLN said:

It was purchased by the company, classified as an asset, and we originally planned to take depreciation on it and the CEO was only going to be listed as a "Driver".

If you didn't report the asset's value to the "driver" as compensation, I would consult with a tax attorney, not a CPA.

I have nothing else to add to this thread, sorry.

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2 hours ago, CHILINVLN said:

It's a company owned asset, not sure why it would be considered compensation to the driver.

If the vehicle is used only for company business, it probably would not be compensation.  On the other hand, if the vehicle can be used for personal reasons, then it might be considered compensation.  This concept is included in FAR 31.205-6(m)(2).

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