What is the annual after-tax cost to her current employer

Assignment Help Taxation

Reference no: EM13905798

Seiko's current salary is $85,000. Her marginal tax rate is 30 percent and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for an office equipment company. Her friend, knowing of her interest in sports cars, tells her about a manager position at the local BMW and Porsche dealer. The new position pays only $75,000 per year, but it allows employees to purchase one new car per year at a discount of $15,000. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, her current employer offers her a $10,000 raise. Answer the following questions about this analysis.

a) What is the annual after-tax cost to her current employer (office equipment company that has a 35 percent marginal tax rate) to provide Seiko with the $10,000 increase in salary?

b) Financially, which offer is better for Seiko on an after-tax basis and by how much? (Assume that Seiko is going to purchase the new car whether she switches jobs or not.)

c) What salary would Seiko need to receive from her current employer to make her financially indifferent (after taxes) between receiving additional salary from her current employer and accepting a position at the auto dealership?

Reference no: EM13905798

Questions Cloud

Definition of quality and effectiveness : Introduction: Quality and Effectiveness, Explain what the paper is about as a whole, Include a definition of quality/effectiveness and its impact on programs and practices. Base your thinking on what you learned during and Explain your definition of..

What is his after-tax benefit of receiving each benefits : Assuming Ahmed is subject to a marginal tax rate of 30 percent, what is his after-tax benefit of receiving each of these benefits?

Do you seem to be getting an unbiased listing of best flight : Pick three proposed flights and look for each one on two different travel websites. How do the search results differ? Do you seem to be getting an unbiased listing of the best flights?

Identify and read the section in the group status report : Identify and read the section in the Group Status Report 2011, section 12, regarding Sustainability.

What is the annual after-tax cost to her current employer : What is the annual after-tax cost to her current employer (office equipment company that has a 35 percent marginal tax rate) to provide Seiko with the $10,000 increase in salary?

Construct a scatter plot of the data : Construct a scatter plot of the data, plotting birth weight on the X axis and IQ on the Y axis. Does the relationship appear to be linear

Compare realization of income with recognition of income : Compare and contrast realization of income with recognition of income. Tim is a plumber who joined a barter club. This year Tim exchanges plumbing services for a new roof.

Understanding of a selection of the principal theories : Demonstrate a critical understanding of a selection of the principal theories, principles, concepts and terminology. Present knowledge that is detailed in some areas and/or knowledge of one or more specialisms that are informed by forefront develo..

Describe the concept of realization for tax purposes : Based on the definition of gross income in $61, related regulations, and judicial rulings, what are the three criteria for recognizing taxable income? Describe the concept of realization for tax purposes.

User Account

All Pages