QUESTION: WHAT MAKES THIS LEGAL?

ANSWER: AN “ACCOUNTABLE PLAN”.

ACCOUNTABLE PLAN

The following sets forth the facts as described by the Internal Revenue Service as to the validity and acceptance. The main criteria is the compliance with Section 62(c) of the Code. This section describes the requirements to meet with an “Accountable Plan” which has the following requires.

1. The expenses paid must be substantiated.

To substantiate the charges the rental rate of each piece of equipment subject to the plan and monitors the available time of its use through time sheets and invoices your company accordingly. The rental rates are derived from a formula created with the assistance of Accountants and the Internal Revenue Service which are normal and customary to your area of the county.

2. The rental expenses of the equipment must qualify for business expense deductions under Section 162(a).

(1) The payments to the third party administrator are in fact for rents and (2) are a condition to the continued use of the property. (3) The property is used in the business and (4) the business does not take title to or equity in the equipment. These four conditions satisfy the requirements in Section 162(a).

Maintaining a true “Accountable Plan” is the key to the successful operation of the plan. Additionally, a “third party relationship” validates the requirement of a accountable plan.