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Separate records for business and personal mileage are required. IRC 274(d) <br />If records are not provided by the employee, the value of all use of the automobile is wages to <br />the employee, and the employee can then take itemized deductions for any substantiated business <br />use on Form 1040, Schedule A. Reg. ,¢1.132-5(b) <br />If records are provided by the employee to the employer, only the personal use of the <br />automobile is wages to the employee. <br />Exceptions to the recordkeeping requirements apply in certain situations discussed latter in this <br />chapter. <br />Valuing Personal Use of Employer-Provided Vehicle <br />Personal use of an employer's vehicle is taxable wages to the employee. The following procedure <br />should be used to determine how much to include in wages on the employee's Form W-2. Reg. <br />,¢1.162-2(d) <br />Sten l: Compute personal use based on miles driven Example: <br />2,000 personal miles/10,000 total miles = 20% Personal use <br />Stev 2: Apply valuation rule -General Valuation Rule or one of three special automobile <br />valuation rules <br />General Valuation Rule <br />Computation: <br />1. Determine what employee would pay to lease auto (FMV*). <br />2. Multiply FMV by % of personal use (computed in Step 1). <br />Example: Cost to lease car (FMV) for 1 yr. plus value <br />of fuel provided $ 4,000 <br />3. Multiply by 20% personal use 20% <br />Include in wage of employee $ 800 <br />* FMV (fair market value) -the amount an employee would have to pay to a third party in <br />an arms-Length transaction. Reg. ~ 1.61-21(b)("4) <br />Three Special Automobile Valuation Rules <br />• Automobile Lease Valuation Rule Reg. ,¢1.61-21(d) <br />• Vehicle Cents-Per-Mile Rule Reg. ¢1.61-21(e) <br />• Commuting Rule Reg. X1.61-21(~ <br />49 <br />