Under the lease-value rule, how is the taxable income for the employee determined? • A. Subtract the dollar amount of the fuel used for personal purposes. • B. Use the annual lease value amount for the vehicle from Publication 15b. • C. Estimate the dollar amount associated with personal usage of the vehicle. • D. Multiply the lease amount by the age of the vehicle.
The correct answer is: **B. Use the annual lease value amount for the vehicle from Publication 15b.** ### Explanation: Under the lease-value rule, the taxable income for the employee is determined by using the annual lease value amount for the vehicle, as specified in IRS Publication 15-B (Employer's Tax Guide to Fringe Benefits). This publication provides a table that lists the annual lease values for vehicles based on their fair market value. ### Steps to Determine Taxable Income: 1. **Determine the Fair Market Value (FMV) of the Vehicle**: Find the FMV of the vehicle as of the first date it is made available to the employee for personal use. 2. **Find the Annual Lease Value**: Use the FMV to look up the corresponding annual lease value in the table provided in IRS Publication 15-B. 3. **Calculate Personal Use**: Determine the percentage of the vehicle's use that is for personal purposes. 4. **Calculate Taxable Income**: Multiply the annual lease value by the percentage of personal use to determine the taxable income. The other options are not correct: - **A. Subtract the dollar amount of the fuel used for personal purposes**: This is not how the lease-value rule works. Fuel costs may be considered separately, but they do not determine the lease value. - **C. Estimate the dollar amount associated with personal usage of the vehicle**: The lease-value rule uses a specific table from Publication 15-B,
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