First off, if you return that instrument you lose all your rental equity. Many people don't even realize they've been building up rental credit that can be used to purchase a student-level instrument. Sometimes rental credit can even be used towards intermediate-level instruments. So you don't want to throw away hundreds of dollars of rental equity if your child is going to play that instrument next year.
Second, if your child is going to play next year - you don't want to lose all the progress that has been made through the year. While the summertime is certainly a time to have some fun - it's also a great time to practice and maybe even get some lessons. Let's face it - band directors simply don't have much time for one-on-one teaching. So getting some face-to-face lessons with a professional teacher can really supercharge the learning process. How much confidence and pride do you think your child will have if he hits school next year and gets First Chair? All because you gave them the tools and they put in some practice time.
So, if your child gave it their best but decided not to continue - simply turn in the instrument. Maybe they'll try a different one next year. However, if they're going to continue to play - I really believe you'd be amazed at how one-on-one lessons can jump-start not only their progess, but their enthusiasm.