Are There Tax Liability Issues When Donating PERS Systems?
Question:
On occasion, I see other medical alerts dealers use the term “free donated equipment” versus a “lease of equipment”. Is this because of some tax liability on leasing? Is it OK to say we are donating the equipment for you to use but a monthly monitoring fee is required?
Answer:
I’m not sure who is “donating” personal emergency response (PERS) systems or equipment. I am certainly unfamiliar with that business model. While I haven’t thought about this from a tax standpoint, it could actually have adverse tax consequences. I’d rather have the tax experts explore and explain the tax issues, but I’ll take a quick stab at it.
If an integrator purchases equipment with the intent of donating it, how would it be expensed out? The donation isn’t going to a charitable organization so it’s not deductible. If the system is valued and the purchase price is forgiven, there could be a tax consequence to the end user. The concept of donation is so foreign to me that I am having trouble considering it.
PERS systems are either sold or leased. Even if leased, there is little expectation of getting the equipment back. The Standard PERS Lease has an option for the alarm company to require the subscriber to purchase the equipment if not returned in good condition after the lease, or monitoring, contract is expired or terminated. Of course, if it’s sold then the subscriber isn’t expected to return the equipment.
I’m not going to speculate if there are liability issues with a donation. I just don’t recommend doing it that way.
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About the Author
Ken Kirschenbaum, SSI Contributor
Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
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