Question

Friends Jackie (0.5 percent owner), Jermaine (1 percent owner), Marlon (2 percent owner), Michael (86 percent owner), and Tito (10.5 percent owner) are shareholders in Jackson 5 Inc. (an S corporation). As employees of the company, they each receive health insurance ($11,000 per year benefit), dental insurance ($2,000 per year benefit), and free access to a workout facility located at company headquarters ($500 per year benefit). What amount of these fringe benefits are taxable to Jackie?

Answer 1

$0

Step-by-step explanation:

Since Jackie owns less than 2% of the stocks of Jackson 5, then all the fringe benefits that she can receive are tax free. The same applies to Jermaine and Marlon.

Only Michael and Tito would be taxed for the fringe benefits that they receive since they own more than 2% (health insurance $11,000 + dental insurance $2,000). Access to the workout facility is not taxable for any of them.