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Taxable Fringe benefit - IT ee's to buy old computers?

Our company wants to offer the IT department employees the chance to buy old computers and the legal department wants to know if this would be a taxable fringe benefit? I found info on the IRS website,(References: IRC §§ 132, 3121(a)(20), 3306(b)(16), 3401(a)(2)) about "qualified employee discounts" but I don't think it applies in this situation since our company doesn't sell computers?

Or would it not be a taxable fringe benefit as long as they make them pay fair market value? (I won't go into the discrimination part of only offering it to the IT employees.... :x )

Comments

  • If they pay FMV, there is no compensation. I don't think there is a discrimination issue either - I guess the question is what you normally do with surplus IT equipment. It could be a matter of convenience - that is, IT employee A knows that piece of equipment B is being disposed of and would like to buy it and you know that the FMV is. So long as the price is the same as what you would otherwise get for it, there should not be any compensation. The transaction should be arm's length, the memory should be well scrubbed (that should be the case anyway) , and they should not be allowed to load them up with stuff that would not normally come with it without paying for that too.

    I've purchased surplus computers from university and college property disposition - Some have worked OK and some have not. But running the "sales" is an issue when they are open to all.

    I'm assuming this is an occasional "I'd like to buy that machine" sort of thing rather than all being scooped up at a bargain price to be resold out of the garage. But then, whoever is buying them otherwise is probably doing that. Or are they being donated?

    On the discrimination issue - I suspect that if you feel upset about that, chances are the price is less than FMV.
  • Thanks Pat - I was being somewhat sarcastic about the discrim thing.... :oops:
  • Actually Michelle, the sarcasm was lost on me until I saw the "mad" face - And then it was still lost on me because if you were mad, the there must be a bargain element in the picture - otherwise you would be indifferent. Or, perhaps not so much indifferent, but there is something to be said for getting an older computer from a known source at a fair price when that is adequate for your needs.

    On the other other hand (the first being indifferent, the second knowing a good deal when you see it) if it were an older computer, why would a tech geek be interested in it at any price?

    And there lies the rub - what is actually going on here? Could be a good reason (it is really for grandma whose friends are all on Facebook and the older model will work just fine for now thank you - oh and time actually does speed up for us old folk - or rather our minds slow down - so we don't really notice longer download times), but also could be that it is a bargain price.

    You are correct that employee discount does not apply because this is not a sale of goods or services regularly sold to the general public.