Bob,an employee of Modern Corp.,receives a fringe benefit (in lieu of a salary increase)of $1,000.Bob is in a 32% tax bracket.The fringe benefit is nontaxable to Bob.If he had instead paid for the benefit out of his own money,the cost would not be deductible.Bob's after-tax savings from receiving the tax-free benefit is
A)$0.
B)$320.
C)$680.
D)$1,000.

Question

Quizplus · Accepted Answer

If the fringe benefit is nontaxable to Bob, then he saves the amount of taxes he would have paid on the benefit if he had received it as salary. In this case, Bob is in a 32% tax bracket, so he saves 32% of $1,000, which is $320.

Bob,an Employee of Modern Corp