Question

Jay Corporation owns several automobile dealerships. This year, the corporation initiated a policy of giving the top salesperson at each dealership a free vacation trip to Florida. The president believe that this is an effective sales incentive. The cost of the vacation is deductible by the corporation as compensation paid to employees and is taxable to the recipients. Nevertheless, the president objects to reporting the value of the vacation as income on the W-2’s of the recipients and to withholding taxes from wages for the value of the trips. He feels that this undermines the effectiveness of the incentive. What are the implications of this behavior for the corporation and the president?

Answer 1

Answer: The Implications of this behavior to the corporation would be detrimental to their operations because as an institution they are not declaring their expenses on staff-(Vacation) from being entered into

the financial books for proper accounting purposes.

While the behavior of the MD shows that he has been praticising sharp practices with the company resources for a while and he should be ask to step down.