What is the credit checking procedure of the dealer before selling a vehicle with in-house financing?
• Compare this to the credit checking procedure of notes sold to third parties. • What steps did the dealer take to determine the FMV of the loans before they were sold? • What steps did the RFC take in determining the FMV of the loans before they were acquired? • Has the prime interest rate increased or decreased since the date of the loan? The FMV of a loan decreases if interest rates increase. Computation of Adjustment Adjustment: Change the RFC¡¦s accounting method to accrual. This adjustment is made when the agent is accepting the RFC as a separate business entity, but income is distorted due to IRC 267 and 446. Finance contract discount-losses claimed xxx a Subtract installment collections reported as income (xxx) b Add IRC 481 adjustment (year of change only) xxx Equals: Increase to taxable income xxx === • This number should reflect the finance contract discount deductions or losses claimed by the dealer on contracts discounted, assigned, or sold to the RFC. These amounts are u
