incentive to open new auto dealership

[ann newman]

I have a CPA friend who has a client who is an auto dealer. Hundai or Honda or one of the auto manufacturers wants this client to open a dealership in a new area that is just being built. They are offering an incentive of $500,000 to offset the costs of building the new dealership plus a flat $50,000 a year for up to ten years as long as he keeps the dealership open and doesn't sell it. The first $500,000 seems like it could easily be an offset to the cost of building reducing basis of the building and equipment. The client is trying to set-up the payment to go directly to the builder of the dealership. Could the remainder which is a set amount, not subject to sales, also be set-up as a receivable at construction and reduce the basis in equipment/building/set-up costs of the dealership?

Thanks for your input. Ann

[kcjenkins]

I believe the continuing payments would have to be treated as either income or an offset of COGS, as received, not part of the cost of the building or lot, etc.