Ronald Ferrer is an employee who drives a 2017 Chevrolet Malibu as a company car.The fair-market value of the car is $23,175.He has been given the choice to have his fringe benefit reported on his W-2 either using the lease-value rule or the cents-per mile rule.According to Publication 15-b,the lease value is $6,350.He has driven 2,500 miles for personal use and 23,500 miles in total during the year.The car has been available for use on 250 days during the year.Ronald's employer pays for all fuel.What method and valuation will yield the lowest fringe-benefit amount for Ronald? (Do not round intermediate calculations,only round final answer to two decimal points. )

Question

Quizplus · Accepted Answer

To determine the lowest fringe benefit amount for Ronald, we need to calculate the benefit amount using both the lease-value rule and the cents-per-mile rule, and choose the lower value.

Lease-value rule:
Annual lease value = Lease value x personal use percentage x days available for personal use
Annual lease value = $6,350 x (2,500/23,500) x 250
Annual lease value = $675.53

Fringe benefit = Annual lease value + fuel expenses
Fringe benefit = $675.53 + $0 (since employer pays for fuel)
Fringe benefit = $675.53

Cents-per-mile rule:
Fringe benefit = Standard mileage rate x personal miles driven
Fringe benefit = $0.535 x 2,500
Fringe benefit = $1,337.50

Since $675.53 is lower than $1,337.50, the lease-value rule yields the lowest fringe benefit amount for Ronald. Therefore, the best choice is C) Lease-value, $600.19.

Ronald Ferrer Is an Employee Who Drives a 2017 Chevrolet