Why are Trade Discount deferrals now an issue?
It’s due to the following IRS rulings: Revenue Procedure 2002-09 provides guidance on “Qualified Volume-Related Trade Discounts” and Revenue Procedure 2002-19 allows for the recovery of a negative 481a (“taxpayer favorable”) to be realized in the year of change. How do Finance Credits or Flooring Assistance qualify as a Trade Discount? Regardless of the intended or stated purpose of a factory receivable, Finance and Flooring assistance is “an unconditional receivable associated with the purchase of a vehicle.” Whether the dealer floors the vehicle or not, it does not determine if the dealer will or will not receive the discount. The dealer still receives the discount (flooring or finance credits), which reduces the base cost of the vehicle. The mechanism that triggers the discount is the purchase of that vehicle. In addition, if the mechanism that triggers the payment of the credit is the sale of the vehicle, this does not eliminate the qualification of the Trade Discount. The dealer q
