Question

Ali is an employee of Albuhaira Insurance Corp. Albuhaira leased a car to be used by Ali who is an employee of Albuhaira, on his business trips. The annual lease-value of this vehicle is $15,000. In the current year, 70 percent of the miles driven by Ali in this vehicle were on business and 30 percent were for his personal use. How much, if any, taxable income does Ali have from his use of this vehicle?

		$4,500.
		$15,000.
		None of these answers.
		$0.
		$10,500.

Answer 1

A company vehicle used for business purposes is not considered taxable income. However, when the employee uses the vehicle for personal use, it becomes taxable in the hands of employee.

According to Annual lease value method, multiply the annual lease value of the car by the percentage of personal miles driven. This will give you the Fair Market Value of the employee’s personal use of a company provided vehicle.

In the given question, employee has used the 30 % of miles drove by car for personal pupose

Therefore, $ 15000 * 30% = $ 4500 will be taxable in the hands of Ali for usage of company car for the personal purpose.

First Option has to be selected

Pls do rate, if the answer is correct and comment, if any further assistance is required.