Lakiesha is an employee who drives a 2019 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? (Do not round intermediate
Calculations, only round ﬁnal answer to two decimal points.)

Question

Quizplus · Accepted Answer

To calculate the fringe-benefit using the lease-value rule: 
$7,750/12 = $645.83 per month 
$645.83 x 12 = $7,750 for the year 
$7,750 x (4,500 personal miles / 31,250 total miles) = $1,116.07

To calculate the fringe-benefit using the cents-per-mile rule: 
For personal use: 
4,500 miles x $0.20 (standard mileage rate for 2019) = $900 
For total use: 
31,250 miles / 200 days = 156.25 miles per day 
156.25 miles per day x 365 days = 56,890.63 
56,890.63 x $0.20 = $11,378.13 
$11,378.13 - (business miles x $0.20) = $1,298.12 
$900 + $1,298.12 = $2,198.12

Therefore, the lease-value rule yields a lower fringe-benefit amount for Lakiesha, with a total of $1,116.07. However, the cents-per-mile rule with personal use only yields a lower fringe-benefit amount of $859.01. So, the best choice is D, which is the cents-per-mile method for personal use at $859.01.

Lakiesha Is an Employee Who Drives a 2019 Buick Verano