police car supplied - deduction?

[D Eckerman]

Business says local car dealer supplies a car for detective work and his CPA firm takes a full deduction of the value.

After the car is recognized - 1 - 4 months, they switch it out. He gets it back to sell....

Wants to know why I am not doing that for him?

Could it be the reduction in cost vs sale - altho' I am sure he is able to sell the car for more than he paid for it even after being used...

any ideas?

[kcjenkins]

Is he saying that they deduct the 'full cost' of the car, even though they are going to get it back, then do not recognize any income when they 'get it back'? I could see deducting the FRV of the car for the time it is 'donated', and adjusting the cost basis for that amount. But no way can they deduct the cost as a donation unless they turn around and record income when it is given back to them. And regardless, they could never deduct more than their COST, not the fair market value.

[Mel in Hawaii]

I am NOT a CPA, but I have a question here...

Is TITLE to the car being transferred to the police department when this occurs or is this a 'rental' situation? Sounds more like they are renting the car to me. And I bet that the dealer is selling this car as NEW afterwards.

And I wonder why I don't trust car salemen, especially their managers, and this is coming from someone who's fathers business was selling cars.

[D Eckerman]

THAT'S SORT OF HOW i SAW IT...

wonder how the CPA rationalizes it..

[kcjenkins]

De, are you saying that title does not transfer? In that case it is clearly not correct to deduct the cost of the car, since you are not donating anything but the use for a limited time, and that is not something you can donate unless you first recognize the rental income. I wonder if this is just one of those cases where the client is telling you what HE THINKS WAS DONE by the CPA, rather than what was actually done? Did you get to see the returns that had such deductions?