Bonnie's employer provides her with an annual dinner club membership costing $5,000.Her marginal tax rate is 25 percent.Her employer has a marginal tax rate of 35 percent.What is Bonnie's after-tax benefit?

Question

Quizplus · Accepted Answer

Bonnie's after-tax benefit is calculated by subtracting the tax on the benefit from the cost of the membership. The tax on the benefit is 25 percent of $5,000, or $1,250. Therefore, Bonnie's after-tax benefit is $5,000 - $1,250 = $3,750.

Bonnie's Employer Provides Her with an Annual Dinner Club Membership