4.1. ERMUSR 05-12-2009 - Laserfiche WebLink

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a special valuation rule to determine the value of certain benefits. This section does not discuss the special valuation rule used to value meals provided at an employer-operated eating facility for employees. For that rule, see Regulations section 1.61-21(j). This section also does not discuss the special valuation rules used to value the use of aircraft. For those rules, see Regulations sections 1.61-21(g) and (h). General Valuation Rule You must use the general valuation rule to determine the value of most fringe benefits. Under this rule, the value of a fringe benefit is its fair market value. Fair market value. The fair market value (FMV) of a fringe benefit is the amount an employee would have to pay a third party in an arm's-length transaction to buy or lease the benefit. Determine this amount on the basis of all the facts and circumstances. Neither the amount the employee considers to be the value of the fringe benefit nor the cost you incur to provide the benefit determines its FMV. Employer-provided vehicles. In general, the FMV of an employer-provided vehicle is the amount the employee would have to pay a third party to lease the same or similar vehicle on the same or comparable terms in the geo- graphic area where the employee uses the vehicle. A comparable lease term would be the amount of time the vehicle is available for the employee's use, such as a 1-year period. Do not determine the FMV by multiplying a cents-per-mile rate times the number of miles driven un- less the employee can prove the vehicle could have been leased on acents-per-mile basis. Cents-Per-Mile Rule Under this rule, you determine the value of a vehicle you provide to an employee for personal use by multiplying the standard mileage rate by the total miles the employee drives the vehicle for personal purposes. Personal use is any use of the vehicle other than use in your trade or business. This amount must be included in the employee's wages or reimbursed by the employee. For 2008, the standard mileage rate is 50.5 cents per mile. You can use the cents-per-mile rule if either of the following requirements is met. • Yau reasonably expect the vehicle to be regularly used in your trade or business throughout the calen- dar year {or for a shorter period during which you own or lease it). • The vehicle meets the mileage test. Maximum autamo6iie value. You cannot use the cents-per-mile rule for an automobile (any four-wheeled vehicle; such as a car, pickup truck. or van) if its value when you first make it available to any employee for personal use is more Than an amount deter- mined bythe lRS asthe maximum automobile value for the year, For example, you cannot use the cents-per-mile rule for an automobile that you first made available fo an em- ployee in 2007 if its value at that time exceeded $15,100 for a passenger automobile or $i&,100 for a truck or van. The maximum automobile value for 2008 will be published in a revenue procedure in the Internal Revenue Bulletin early in 2008. If you and the employee own or lease the automobile together, see Regulations section 1.61-21(e)(1)(iii)(8). Vehicle. For the cents-per-mile rule, a vehicle is any mo- torized wheeled vehicle, including an automobile, manu- factured primarily for use on public streets, roads, and highways. Regular use in your trade or business. A vehicle is regularly used in your trade or business if at least one of the following conditions is met. • At least 50% of the vehicle's total annual mileage is for your trade or business. • You sponsor a commuting pool that generally uses the vehicle each workday to drive at least three em- ployees to and from work. • The vehicle is regularly used in your trade or busi- ness on the basis of all of the facts and circum- stances. Infrequent business use of the vehicle, such as for occasional trips to the airport or between your multiple business premises, is not regular use of the vehicle in your trade or business. Mileage test. A vehicle meets the mileage test fora calen- dar year if both of the following requirements are met. • The vehicle is actually driven at (east 10,000 miles during the year. If you own or lease the vehicle only part of the year, reduce the 10,000 mile requirement proportionately. • The vehicle is used during the year primarily by employees. Consider the vehicle used primarily by employees if they use it consistently for commuting. Do not treat the use of the vehicle by another individ- ual whose use would be taxed to the employee as use by the employee. For example, if only one employee uses a vehicle during the calendar year and that employee drives the vehicle at least 10;000 miles in that year, the vehicle meets the mileage test even if all miles driven by the employee are personal. Consistency requirements. If you use the cents-per-mile rule, the following requirements apply. • You must begin using the cents-per-mile rule on the first day you make the vehicle available to any em- ployee for personal use. However, if you use the commuting rule {discussed later) when you first make the vehicle available to any employee for per- sonal use, you can change to the cents-per-mile rule on the first day for which you da not use the commuting rule. • You must use the cents-per-mile rule for alt later years in which you make the vehicle available to any employee and the vehicle qualifies, except that you can use the commuting rule for any year during Page 20 Publication 15-8 (2008)