Michael McBride is an employee of Reach-it Pharmaceuticals.His company car is a 2017 Lexus GS 200t with a fair-market value of $50,000 and a lease value of $13,250,according to Publication 15-b.During the year,Michael drove 45,000 miles,of which 9,000 were for personal use.The car was available for use on 270 of the days during the year.All gasoline was provided by the employer and is charged back to Michael at $0.055 per mile.What is the amount of the company-car fringe benefit that will appear on Michael's W-2,using the lease-value rule? (Do not round intermediate calculations,only round final answer to two decimal points. )

Question

Quizplus · Accepted Answer

First, we need to calculate the total amount of the fringe benefit using the lease-value rule:
$13,250 × (45,000 miles/22,500 miles) = $26,500
Next, we need to determine the personal use percentage:
9,000 personal miles / 45,000 total miles = 20%
Then, we need to reduce the fringe benefit by the personal use percentage:
$26,500 × 20% = $5,300
$26,500 - $5,300 = $21,200
Finally, we need to add the cost of the gasoline:
$0.055 × 45,000 miles = $2,475
So, the total fringe benefit that will appear on Michael's W-2 is $21,200 + $2,475 = $23,675, which rounds to $2,455.27. Therefore, the best choice is B.

Michael McBride Is an Employee of Reach-It Pharmaceuticals