Question

Malcolm Figueroa is a sales employee of Carefree Pools and Spas, Inc. During 2017, he was issued a company car with a fair market value of $35,000. He drove a total of 22,000 miles, used the car for 2,000 miles for personal use, and his employer paid for fuel, charging Malcolm five cents per mile. Under the lease value rule, what is the amount that must be added to Malcolm’s gross pay for 2017?

Answer 1

Answer:

$940.83 amount to be added to Malcolm's gross pay for 2017

Explanation:

under the lease value rule as seen in the table attached

Annual lease value for a car with a market value of $35000 = $9250

Malcolm used the vehicle for personal use for = 2000 miles out of the 22000 miles

next we calculate the prorated annual lease percentage ( percentage of personal use by Malcolm ) = 2000/22000 * 100 = 9.09%

The prorated annual lease value = Annual lease value * prorated annual lease percentage = $9250 * 9.09% = $840.83

fuel paid for by employer per mile for Malcolm's personal use = 2000 * 5 cents = 10000 cents = $100

therefore amount added to Malcolm's gross pay would be = prorated annual lease + fuel charges paid by employer

=  $840.83 + $100 = $940.83

Answer 2

Answer:

Check the explanation

Explanation:

As per publication 15-b Of employers tax guide fringe benefits provides you how to use lease value rules and when to use , The following question is answered according to it

Employee Name : Malcolm Figueroa      

Annual Lease Method :      

1 Fair market value of vehicle 35000    

2 Annual lease value : 9250    

3 Prorated Annual lease percentage 3600 / 22000 = 16.3636%

4 Prorated Annual lease Value: Annual lease value * Prorated Annual lease percentage = $

9250 * 16.3636% = 1513.633$

5 iF FUEL PROVIDED BY EMPLOYER ENTER MILE 3600 * 5.5cents = 198$

Total fuel charges    = 198$

6 Total personal Use Taxable income 1513.633 + 198 = $1711.633

Kindly check the attached image below to see the well arranged accounting entry above.

First we will find the annual lease value from table given by using fmv of automobile i.e for 35000 its 9250

Now we will Multiple  annual lease value by % of personal driven by employee

which is calculated by 3600/22000*100= 16.3636%

9250*16.3636%= 1513.633

So this the personal usage vehicle which will be added = $1513.633

And we will add the fuel cost to this amount which is = 3600*5.5cents= $198

total personal use taxable = $1711.633