You can exclude the value of lodging you furnish to an employee
from the employee's wages if it meets the following tests.
- It is furnished on your business premises.
- It is furnished for your convenience.
- The employee must accept it as a condition of
employment.
Different tests may apply to lodging furnished by educational
institutions. For information, see section 119(d) of the Internal
Revenue Code.
This exclusion does not apply if you allow your employee to choose
to receive additional pay instead of lodging.
On your business premises.
For this exclusion, your business premises is generally your
employee's place of work. (For special rules that apply to lodging
furnished in a camp located in a foreign country, see section 119(c)
of the Internal Revenue Code and the related regulations.)
For your convenience.
Whether you furnish lodging for your convenience as an employer
depends on all the facts and circumstances. You furnish the lodging to
your employee for your convenience if you do this for a substantial
business reason other than to provide the employee with additional
pay. This is true even if a law or an employment contract provides
that the lodging is furnished as pay. However, a written statement
that the lodging is furnished for your convenience is not sufficient.
Condition of employment.
Lodging meets this test if you require your employees to accept it
because they need to live on your business premises to be able to
properly perform their duties. Examples include employees who must be
available at all times and employees who could not perform their
required duties without being furnished the lodging.
It does not matter whether you must furnish the lodging as pay
under the terms of an employment contract or a law fixing the terms of
employment.
Example.
A hospital gives Joan, an employee of the hospital, the choice of
living at the hospital free of charge or living elsewhere and
receiving a cash allowance in addition to her regular salary. If Joan
chooses to live at the hospital, the hospital cannot exclude the value
of the lodging from her wages because she is not required to live at
the hospital to properly perform the duties of her employment.
S corporation shareholder-employee.
For this exclusion, do not treat a 2% shareholder of an S
corporation as an employee of the corporation. A 2% shareholder is
someone who directly or indirectly owns (at any time during the year)
more than 2% of the corporation's stock or stock with more than 2% of
the voting power.
Previous | First | Next
Publication Index | 2000 Tax Help Archives | Tax Help Archives | Home
