Question

Florence is the chief financial officer of Hazel Corporation, a publicly traded, calendar year C corporation. For the current year, her compensation package consists of:

Cash compensation $1,500,000
Bonus tied to company performance 700,000
Taxable fringe benefits 250,000
Nontaxable fringe benefits 75,000

How much of Florence's compensation is deductible by Hazel Corporation?

Answer 1

Answer:

$1,075,000

Explanation:

The calculation of  Florence's compensation is deductible by Hazel Corporation is shown below:-

According to Internal Revenue Service as per section 162(m)  the deduction limit is = $1,000,000

Non taxable fringe benefits = $75,000

Total Florence's compensation is deductible by Hazel Corporation = Deductible limit as per section 162(m) Internal Revenue Service + Non taxable fringe benefits

$1,000,000  + $75,000

=$1,075,000