Question

Lakiesha is an employee who drives a 2017 Buick Verano as a company car. The fair-market value of the car is $28,545. She has been given the choice to have her fringe benefit reported on her W-2 either using the lease-value rule or the cents-per mile rule. According to Publication 15-b, the lease value is $7,750. She has driven 4,500 miles for personal use and 31,250 miles in total during the year. The car has been available for use on 200 days during the year. Lakiesha's employer pays for all fuel. What method and valuation will yield the lowest fringe-benefit amount for Lakiesha

Answer 1

Answer:

using the lease value rule, the employee's fringe benefits will be lower = $859.01.

Explanation:

The cents per mile rule for calculating fringe benefits = total number of miles driven for personal use x standard deduction = 4,500 x $0.58 = $2,610

using the lease value rule:

Annual lease value = publication 15-b value x amount of days available per year = $7,750 x (200/365) = $4,246.58

$4,246.58 x (4,500 miles / 31,250 miles) = $611.51

gas benefit = 4,500 x $0.055 = $247.50

total fringe benefits = $611.51 + $247.50 = $859.01