Different expert here - my name is ***** ***** I have a different answer.
When an employer provides housing or lodging for an employee, the employee may be able to exclude the value of the lodging from gross income. The lodging must meet three tests under Regs. Sec. 1.119-1(b): (1) The lodging must be on the employer's business premises; (2) the employer must provide the lodging for the employer's convenience rather than for the employee's convenience; and (3) the employer must require the employee to accept the lodging as a condition of employment. Thus, the employee must need to live in the lodging to be able to perform the duties of the employment.
Example 5: J is an employee of an apartment building, performing maintenance and repairs. His employer requires him to live in the apartments to be able to provide emergency repair services 24 hours per day and therefore provides J with free lodging there.
J meets all three tests: (1) The lodging is on the employer's premises; (2) it is for the employer's convenience; and (3) J must live there to be on call 24 hours a day as a condition of his employment. Therefore, he may exclude the value of the free lodging from gross income.
FOR THE EMPLOYER'S CONVENIENCE
Sec. 119(b) specifies that the terms of an employment contract or state statutes that describe terms of employment are not determinative of whether meals or lodging are for the employer's convenience. If a state statute or employment contract treats employer-provided lodging as compensation, the employee may still exclude the value of the lodging from gross income for federal income tax purposes if the lodging meets the three tests. The employee must determine whether he or she may exclude the value of lodging from gross income by an objective analysis of all relevant facts and circumstances.
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