Frances McNale is an employee who drives a 2017 Ford C-Max with a fair-market value of $29,500.The lease value is $7,750,according to Publication 15-b.The car was available for 150 days during the year,and she reported that 6,500 of the 27,850 miles were driven for personal purposes.The company pays for all fuel and is charged back to Frances at $0.055 per mile.What is the amount of the company-car fringe benefit that will appear on Frances'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

To calculate the amount of the company car fringe benefit using the lease-value rule, we need to follow these steps:

1. Determine the annual lease value: $7,750 (given)
2. Determine the percentage of personal use: 6,500/27,850 = 23.32%
3. Determine the value of personal use: $29,500 x 23.32% = $6,871.40
4. Determine the value of business use: $7,750 - $6,871.40 = $878.60
5. Determine the value of fuel: 27,850 - 6,500 = 21,350 miles driven for business use
       $0.055 x 21,350 = $1,174.25
6. Add the value of business use and fuel: $878.60 + $1,174.25 = $2,052.85
7. Allocate the value over the days the car was available: $2,052.85 x 150/365 = $844.18
8. Add the value of personal use: $844.18 + $6,871.40 = $7,715.58
9. Subtract any reimbursement: $0 (given)

Therefore, the amount of the company-car fringe benefit that will appear on Frances's W-2, using the lease-value rule, is $1,100.84 (rounded to two decimal points).

The best choice is A.

Frances McNale Is an Employee Who Drives a 2017 Ford