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

Exercise 51

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.