McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 25

Mike is working his way through college and trying to make ends meet.Tara, a friend, is graduating soon and tells Mike about a really great job opportunity.She is the onsite manager for an apartment complex catering to students.The job entails working in the office for about 10 hours a week, collecting rent each month, and answering after-hours emergency calls.The pay is $10 per hour, plus a rent-free apartment (worth about $500 per month).Tara then tells him the best part: the rent-free apartment is tax-free as well.Knowing that you are a tax student, Mike asks you if the rent-free apartment is really tax free or if this is just another scam.Explain to Mike whether the compensation for the apartment is really a nontaxable fringe benefit.