Video Games Unlimited Inc.allows its game designers to use, without charge, company cars for their personal vacations.The employer's motive for providing the cars is to ensure that these valuable assets (i.e., the employees) of the business are retained.Because this is a reasonable business purpose, the employees will recognize no income from their use of the cars.

Question

Quizplus · Accepted Answer

The personal use of company cars is considered a taxable fringe benefit by the IRS and is subject to income tax. Therefore, the employees will recognize income for the personal use of the cars.