Will my SE still quality for tax credit

[Rexsio]

(“Every time I try to get out…”)

Far as we know, at this time, there’s only one known example of what constitutes a binding contract, and that is the example of the non-refundable 5% deposit mentioned in the IRS advisory. That’s not to say that it’s the only example that passes muster here, but if you happen to have a 5% non-refundable deposit associated with your sales agreement, that alone should give you enough ammo to fight off an IRS audit should they question your attempt to claim the tax credit. After that, as you alluded to, what constitutes a binding contract is going to be broadly defined by the applicable caselaw and legal precedent regarding the elements of a binding contract in your state (e.g., mutual assent, valid offer and acceptance, adequate consideration, capacity, and legality.). At the end of the day, evaluating each of these legal elements, one-by-one, relative to your specific transaction and sales documentation would allow you to reach some conclusions about which contract elements you feel good about (e.g., capacity and legality), and conclusions about which contract elements you may not feel quite as good about (e.g., mutual assent, valid offer and acceptance, adequate consideration). And at that point, it’s just lawyers attempting to persuade the judge (or IRS auditor?) which is the controlling precedent with respect to any of the aforementioned elements of a contract. [IMHO, the “adequate consideration” element is the one that is hardest to argue if you have a fully refundable deposit and no other penalties associated with your sales agreement, but I ain’t your lawyer; I’m a rando on the internet.]

Either way, to the best of my recollection, in all of your posts in this thread, you have never once indicated which state/jurisdiction you live in. (And, to be clear, I’m not asking.). But, all told, if anyone were to attempt to answer your question without referring to the laws/regulations/caselaw in your state jurisdiction, that advice would probably be too general to rely on, even if given by a licensed attorney or tax professional. Either way, I re-offer my previous parting shot from earlier in this thread — rely on the legal advice of internet randos (no matter how reasonable or well-intentioned) at your own peril.

Us a fricken foreigner 40 years here I shouldn’t get into your sophisticated discussion but whatever you referring to why we fighting about those hang outs $ 7500 if you can’t afford a car as SE EV cheapest car
without rebate $ 30000 buy ACE for $ 20000 and work harder to buy Tesla.

 

[Tommm]

Supreme Court says Commissioner v. Gordon, 391 U.S. 83, 96 (1968)

US Tax Court says Niedermeyer v. Commissioner, 62 T.C. No. 34 (1974)

Barack Obama says Health Care and Education Reconciliation Act (2010)

IRS August 16th guidance says "In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount."

Take your pick.

(“Every time I try to get out…”)

Far as we know, at this time, there’s only one known example of what constitutes a binding contract, and that is the example of the non-refundable 5% deposit mentioned in the IRS advisory. That’s not to say that it’s the only example that passes muster here, but if you happen to have a 5% non-refundable deposit associated with your sales agreement, that alone should give you enough ammo to fight off an IRS audit should they question your attempt to claim the tax credit. After that, as you alluded to, what constitutes a binding contract is going to be broadly defined by the applicable caselaw and legal precedent regarding the elements of a binding contract in your state (e.g., mutual assent, valid offer and acceptance, adequate consideration, capacity, and legality.). At the end of the day, evaluating each of these legal elements, one-by-one, relative to your specific transaction and sales documentation would allow you to reach some conclusions about which contract elements you feel good about (e.g., capacity and legality), and conclusions about which contract elements you may not feel quite as good about (e.g., mutual assent, valid offer and acceptance, adequate consideration). And at that point, it’s just lawyers attempting to persuade the judge (or IRS auditor?) which is the controlling precedent with respect to any of the aforementioned elements of a contract. [IMHO, the “adequate consideration” element is the one that is hardest to argue if you have a fully refundable deposit and no other penalties associated with your sales agreement, but I ain’t your lawyer; I’m a rando on the internet.]

Either way, to the best of my recollection, in all of your posts in this thread, you have never once indicated which state/jurisdiction you live in. (And, to be clear, I’m not asking.). But, all told, if anyone were to attempt to answer your question without referring to the laws/regulations/caselaw in your state jurisdiction, that advice would probably be too general to rely on, even if given by a licensed attorney or tax professional. Either way, I re-offer my previous parting shot from earlier in this thread — rely on the legal advice of internet randos (no matter how reasonable or well-intentioned) at your own peril.

I picked up my car in July. I qualify for the credit. I am not trying to paractice law over the internet, so I am simply asking a question because I am wondering if there is a possible paradigm switch. All the conversation so far has been if the buyer is bound.

It is a two way street. The question is simple, the argument one can make with that question is up to them, and then it is up to them to decide if they think the argument is strong enough to do one of two things. 1. Is it strong enough to withstand an audit - that is the ultimate victory. 2. Is it strong enough to negate penalties - that may be enough for someone not working for the IRS (or at least one on this forum - no longer working for the IRS) to take the credit and take their chances on an audit. If I had to make a 7,500 decision, and with the lack of guidance, I would want/hope for #1. But while that is not guaranteed, I would go for it if i felt comfortable with #2 if I was comfortable thinking my damage is limited to interest. While the agent may disallow it, from what I've read, appeals would allow something based on the hazards of litigation. It is up to each person's pain threshold, and what other shenanigans are on their tax return.

In summary, does the deposit, and subsequent issuance of a VIN by the dealer constitute a contract that is binding on the dealer? Simple enough, and you probably don't need to analyze every state's law, and if those three cases cited have different requirements, does that give "you" enough comfort to say you have a contract with the dealer or the dealer has a contract with you.

 

[teslarati97]

In summary, does the deposit, and subsequent issuance of a VIN by the dealer constitute a contract that is binding on the dealer? Simple enough, and you probably don't need to analyze every state's law, and if those three cases cited have different requirements, does that give "you" enough comfort to say you have a contract with the dealer or the dealer has a contract with you.

Under the IRS guidance: In general, a written contract is binding if it is enforceable under State law AND does not limit damages to a specified amount.

Enforceable under state law? Probably
Does not limit damages to a specified amount? If the deposit less than 5% of the value of the vehicle, probably not.

If IRS decides to go down that path, Rivian and Lucid buyers will be very sad to find out that their $1,000 non-refundable reservation fee is insufficient.

 

[gosjsgdi]

I picked up my car in July. I qualify for the credit. I am not trying to paractice law over the internet, so I am simply asking a question because I am wondering if there is a possible paradigm switch. All the conversation so far has been if the buyer is bound.

It is a two way street. The question is simple, the argument one can make with that question is up to them, and then it is up to them to decide if they think the argument is strong enough to do one of two things. 1. Is it strong enough to withstand an audit - that is the ultimate victory. 2. Is it strong enough to negate penalties - that may be enough for someone not working for the IRS (or at least one on this forum - no longer working for the IRS) to take the credit and take their chances on an audit. If I had to make a 7,500 decision, and with the lack of guidance, I would want/hope for #1. But while that is not guaranteed, I would go for it if i felt comfortable with #2 if I was comfortable thinking my damage is limited to interest. While the agent may disallow it, from what I've read, appeals would allow something based on the hazards of litigation. It is up to each person's pain threshold, and what other shenanigans are on their tax return.

In summary, does the deposit, and subsequent issuance of a VIN by the dealer constitute a contract that is binding on the dealer? Simple enough, and you probably don't need to analyze every state's law, and if those three cases cited have different requirements, does that give "you" enough comfort to say you have a contract with the dealer or the dealer has a contract with you.

TL/DR — I’d argue that the mere issuance of the VIN and the actual digits/characters of the VIN are both inconsequential to the binding/non-binding question, but I’d want to see what the sales documents say.

If you recall, my response to your earlier post included a discussion on “mutuality of contract.” It was my premise that (at least in my state), both parties have to be obligated to something in order for there to be a contract. So, I’m going to say that I’ve already answered this question generally, about whether the buyer or the seller is being bound to a contract. If there’s a binding contract, both are obligated to something.

As far as whether the deposit and issuance of a VIN is that convergence of circumstances that are sufficient to form a binding contract. IMHO, probably not. Were I being retained to provide guidance on this situation, my first request would be to see the sales documentation and any other agreements executed by both parties, so I could review the language as it applies to deposits and VINs. As much as you might want to consider this question in the abstract, because we’re talking about a car sales transaction in excess of $500, the Uniform Commercial Code would require a written contract.

And, unless the issuance of a VIN is documented as, itself, a substantive detail to the contract, I would posit that it wasn’t an inherently meaningful detail or event that tips the balance between a binding contract or a non-binding agreement. To wit, were the dealer to provide me a vehicle that matched, literally, every specification in my order (i.e., model, color, trim level, even delivery date) to the letter, but just happened to have a different VIN, I have a hard time imagining a court finding that the dealer had breached a contract on that basis.

 

[Tommm]

Well, if a sales contract is not binding, and the subsequent issuance of a VIN, which basically says the car you want is in production, are meaningless, then so is the clause that says the deposit is not refundable.

As for the VIN being inconsequential assuming there is an identical car, tell that to guys like Seinfeld and to a lesser extend Leno. Seinfeld is known as a collector of bookends. Remember the NSX ad they both were in? If I put my money down to get Serial #1, and the dealer sends me confirmation that I got #1, and then they say sorry, you get #2, I think I would have an action for specific performance, and potential damages assuming they sell #1 for a premium over what #2 is worth. But that assumes the contract I signed is binding... which I was just told it isn't, so would that be a frivolous lawsuit?

What IRS guidance? GCMs, are opinions that one can rely on to get our of a penalty if followed. TAMs, and PLRs are not guidance unless the facts are identical, basically down to the EIN or SSN of the taxpayer.

 

[gosjsgdi]

Well, if a sales contract is not binding, and the subsequent issuance of a VIN, which basically says the car you want is in production, are meaningless, then so is the clause that says the deposit is not refundable.

As for the VIN being inconsequential assuming there is an identical car, tell that to guys like Seinfeld and to a lesser extend Leno. Seinfeld is known as a collector of bookends. Remember the NSX ad they both were in? If I put my money down to get Serial #1, and the dealer sends me confirmation that I got #1, and then they say sorry, you get #2, I think I would have an action for specific performance, and potential damages assuming they sell #1 for a premium over what #2 is worth. But that assumes the contract I signed is binding... which I was just told it isn't, so would that be a frivolous lawsuit?

What IRS guidance? GCMs, are opinions that one can rely on to get our of a penalty if followed. TAMs, and PLRs are not guidance unless the facts are identical, basically down to the EIN or SSN of the taxpayer.

F*ck it. I’m out.
Peace!

 

[teslarati97]

F*ck it. I’m out.
Peace!

You have to remember that Tommm is no longer with the service but still a fed subject to higher IRS review.

I would reckon that he is trying to impart some audit defense wisdom for us mere internet rando-taxpayers.

 

[Tommm]

You have to remember that Tommm is no longer with the service but still a fed subject to higher IRS review.

I would reckon that he is trying to impart some audit defense wisdom for us mere internet rando-taxpayers.

Nah, not subject to higher review. Just trying to get some folks to think of it a few different ways before caving in. Someone else can go into weighing the risk of an audit. Thanks.

 

[IGGYSpop]

What’s the general feeling if you’ve made a non-refundable deposit at 4%? I would consider that still pretty significant. Is 5% really the magic number?

 

[Aquavir]

What’s the general feeling if you’ve made a non-refundable deposit at 4%? I would consider that still pretty significant. Is 5% really the magic number?

I think the general consensus is that there is no general consensus. In general the guidance to me (an internet rando with no legal or tax expertise) seems to state that “binding contract” is state law dependent, and the 5% thing is simply an example. The fine print of the standard purchase order in my state (CT) states explicitly that the contract is binding unless you are getting dealer financing and that falls through; it does not include any mention of a necessary deposit; basically states that after you sign you must purchase the car. You should defer to whatever you signed and probably run it by a tax attorney.


Sent from my iPhone using Inside EVs

 

[Tommm]

... You should defer to whatever you signed and probably run it by a tax attorney.
Sent from my iPhone using Inside EVs

I agree with the first half. The second half calls for some math. Math hurts my brain!

If one takes the credit and does not get audited they are up 7,500. If one decides they don't have a contract, even if they do, they are out 7,500.

Cost v benefit (was this from finance 101?)
A tax attorney is not a contract attorney and vice versa. Tax attorneys start at 400 an hour. A tax attorney will probably tell you there is no consensus. If one asks a tax attorney or contract attorney for an opinion in writing it will probably cost over 2,000. All the written opinion will do is give one a basis to request penalties be abated if the IRS audits one's return, decides the piece of paper signed by the taxpayer and dealer does not fit within the parameters of a poorly defined term, denies the credit, and tries to assess penalties.

So, go ahead, spend 2,000 to see if you can take 7,500, which brings 7,500 to 5,500. Or take a chance at 7,500 using whatever arguments you can come up with, and be prepared to fight if necessary. I merely suggested another way of looking at what binding may mean, which in the case of a contract with someone like a Leno or Seinfeld may have significant value attached to it. Remember this Acura NSX ad from a few years back?

 

[Aquavir]

Oh personally I’m just going to ride with my interpretation, unless my accountant strongly discourages it (which I doubt). The tone from the OP and many on this thread is one of asking for assurances, which no one can give; and you’re right, that likely includes tax attorneys. I’m fine gambling, others may not.


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[CuriousGeorge]

Hold that thought:

https://www.albanyherald.com/news/u...cle_87544490-14f2-5d8a-9b8c-d88b35b0dd17.html

(No, I am not expecting this bill to pass. However, the possibility that the current situation might change is why I'm holding onto my reservation until the vehicle is actually delivered. Why give the dealer any advance warning when they were unwilling to lock in a sale?)

 

[Aquavir]

No, I am not expecting this bill to pass.

Without getting too political I'm going to suggest that there may be some in the GOP that feel that making Georgia voters happy might be advantageous. Just thinking that when the tax credit stuff is separated out, there may be different alliances formed, as compared to the machinations of getting that massive bill passed.

 

[insightman]

Without getting too political I'm going to suggest that there may be some in the GOP that feel that making Georgia voters happy might be advantageous. Just thinking that when the tax credit stuff is separated out, there may be different alliances formed, as compared to the machinations of getting that massive bill passed.

Getting too political, I'm going to suggest the last thing some in the GOP want is for a Senator Warnock-sponsored bill to make Georgia voters happy.

 

[patash]

It's fine, there's still a transition rule if you've already entered in a written binding contract to purchase (deposits don't count) then the Secretary of Treasury will count it as the day before the enactment.

I'm not following. We signed our order contract and gave a deposit in May of this year. I'm not sure what you mean by "deposits don't count". I'm not sure how we could have gotten out of the contract to buy if we had wanted to. The car arrived and we took possession in October. So you're saying we still get the $7500? It seems the quote above by Aquavir would say yes we do.

 

[insightman]

I'm not following. We signed our order contract and gave a deposit in May of this year. I'm not sure what you mean by "deposits don't count". I'm not sure how we could have gotten out of the contract to buy if we had wanted to. The car arrived and we took possession in October. So you're saying we still get the $7500? It seems the quote above by Aquavir would say yes we do.

You may not be sure, but AFAIK if your deposit was refundable, it wasn't a binding contract. You can try claiming the $7,500 federal EV tax credit, but be prepared to prove your contract meets the legal definition of "binding contract." Can you get your dealer to sign a statement proving your deposit was not refundable?

 

[Tifosi]

@patash, I think you will not get it, but speak to an accountant.

 

[Tommm]

I'm not following. We signed our order contract and gave a deposit in May of this year. I'm not sure what you mean by "deposits don't count". I'm not sure how we could have gotten out of the contract to buy if we had wanted to. The car arrived and we took possession in October. So you're saying we still get the $7500? It seems the quote above by Aquavir would say yes we do.

Do your own research and be prepared to convince your tax preparer of your position so they feel comfortable putting their license on the line by signing the return. I didnt see anyone giving tax advice in this string.

Most CPAs are not following this issue unless they or significant other are buying an EV. On the other hand, if you are the only one signing the return, also have your research and backup ready.

 

[Tifosi]

Agree, IMHO, there will be a LOT of audits for this. LOTS and LOTS. Especially with all the new IRS employees. My accountant said to skip 2022 as an EV credit year and wait till 2023. He believes that nearly all who take the credit will be audited. I have taken 2 EV credits and a section 179 with his help, so he has a little experience.