Final answer:
The valuation method allowed for determining the value of employer-provided parking is the lower of the employee's cost or the fair market value. This ensures a fair taxation on the parking benefits provided by the employer and prevents overvaluation that could lead to a higher tax burden for the employee. The correct option is c. Lower of the EE's cost or fair market value
Step-by-step explanation:
When determining the value of employer-provided (ER-provided) parking, the valuation method typically allowed is c. Lower of the employee's (EE's) cost or fair market value. This means that the taxable benefit for the employee should be calculated based on whichever is lesser: the actual cost borne by the employee to acquire a similar parking spot or the fair market value of the parking space provided by the employer.
The reasoning behind this is to prevent overvaluation of the benefit, which could lead to excessive tax liability for the employee. For instance, if an employer is located in a high-cost area where parking rates are steep, but the employee would otherwise not choose to incur such parking expenses, taxing them on the higher fair market value could be unfair.
Furthermore, it is important to adhere to the specific tax regulations and guidance provided by local tax authorities as these rules may vary. Typically, companies will provide documentation that outlines the value of these benefits, in accordance with legal requirements, for tax purposes.