Ronald Ferrer is an employee who drives a 2017 Chevrolet Malibu as a company car. The fair-market value of the car is $23,175. He has been given the choice to have his fringe benefit reported on his W-2 either using the lease-value rule or the cents-per mile rule. According to Publication 15-b, the lease value is $6,350. He has driven 2,500 miles for personal use and 23,500 miles in total during the year. The car has been available for use on 250 days during the year. Ronald's employer pays for all fuel. What method and valuation will yield the lowest fringe-benefit amount for Ronald? (Do not round intermediate calculations, only round final answer to two decimal points.)

Question

Quizplus · Accepted Answer

Using the lease-value rule:

Fringe benefit = Lease value + Personal use value
Personal use value = (personal miles/total miles) x lease value
Personal use value = (2,500/23,500) x $6,350 = $672.34
Fringe benefit = $6,350 + $672.34 = $7,022.34

Using the cents-per-mile rule:

Fringe benefit = (personal miles/total days) x Standard mileage rate x 2
Standard mileage rate = $0.535/mile for 2017
Fringe benefit = (2,500/250) x $0.535 x 2 = $10.70 x 2 = $21.40

The lease-value method yields the lowest fringe benefit amount for Ronald, which is $600.19 ($6,350 + $672.34 - $6,422.15). Therefore, the best choice is C.

Ronald Ferrer Is an Employee Who Drives a 2017 Chevrolet