F. Transfer or Trade-in of Components

Q1. What are the restrictions, if any, about selling or transferring components obtained through E-rate discounts? Can such equipment be traded-in for new components?

Equipment purchased with E-rate discounts may not be transferred for anything of value at any time. Equipment purchased with E-rate discounts may be traded in, if the trade-in amount is applied to the purchase of new eligible equipment and the pre-discount amount on the Form 471 is reduced by the trade-in amount.

Q2. Can an applicant use a credit obtained from a trade-in of components as a way to pay part or all of their share (the non-discount portion) of new products or services funded by E-rate?

Equipment purchased with E-rate discounts may be traded-in, if the trade-in amount is applied to the purchase of new eligible equipment, and the pre-discount amount on the Form 471 is reduced by the trade-in amount. Thus, a trade-in of equipment purchased with E-rate discounts cannot be used toward payment of the applicant’s non-discount share.

On the other hand, if equipment was not purchased with E-rate discounts, the fair market trade-in value may be used toward payment of the non-discount share. The amount credited toward the non-discount share must be the fair market value or acquisition cost, whichever is lower. There is a rebuttable presumption that technology equipment has a three-year life and that the value declines on a straight-line basis. Therefore, the presumptive value of a component with an original cost of $1000 would be $666 after one year, $333 after two years, and would have no value after three years. Time periods are calculated from the date that equipment was originally delivered to the applicant to the estimated delivery date to the service provider. The applicant or service provider may provide evidence of fair market value to rebut this presumption. Although the form of the evidence is flexible, the best evidence would be from an independent third party source indicating the secondary market prices for the specific make and model of equipment traded in.