Answered Essay: Employer provides Employee and Spouse and Child a residence on Employer’s business premises, having a rental value

Employer provides Employee and Spouse and Child a residence on Employer’s business premises, having a rental value of $15,000 per year but charging Employee only $6,000.

What result if the nature of Employee’s work does not require Employee to live on the premises as a condition of employment?

What result if Employer and Employee simply agreed to a clause in the employment contract requiring Employee to live in the residence?

What result if Employee’s work and contract require Employee to live on the premises and Employer furnishes Employee and family $6,000 worth of groceries during the year?

What result if Employer transferred the residence to Employee in fee simple in the year that Employee accepted the position and commenced work? Does the value of the residence constitute excluded lodging?

Expert Answer

 

(a) $9,000 taxable §61According to 119, the employer cannot claim the exclusion of tax because 119(a)(2) is not met.

(b) Taxable §61The “condition of employment” requirement of Section 119 means that the employee must “be required to accept the lodging in order to properly perform the duties of his employment.

(c) The living arrangements would not be counted as gross income because under §119(a)(1) living on the premises is required, however, the groceries would be considered gross income. It seems as though the groceries are furnished as a means of additional compensation.

(d) No. This seems like an accession to wealth clearly realized.

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