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Question
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Hello Ken,
As someone who uses your contracts and reads the emails of some great questions i thought i would pose one myself.
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 just say we are donating the equipment for you to use but a monthly monitoring fee is required?
Sincerely,
Raymond Melanson, President
NEXT MONITORING INC.
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Answer
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I'm not sure who is "donating" PERS (personal emergency response) systems or equipment. That is certainly not the business model I am familiar with. I haven't thought about it from a tax standpoint, but it actually could 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 the equipment is purchased with the intent of donating it I'm not sure how it would be expensed out. The donation isn't to a charitable organization so it's not deductible. If it's 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 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. Just don't do it that way.
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