Resident Manager

Our resident property manager lives on site rent free to manage the building. The IRS says that for the manager to receive the apartment and not pay income tax on its equivalent rental value, he must live there, and be on call 24/7 except for vacations. Yet, the IRS is not able to point to rules governing this. Can anyone provide insight?

I was a board member and the current board is looking for guidance. But the law may have changed and getting through to the IRS this time of year is next to impossible. The IRS told me when I was on the board that as long as the resident manager lived there 7 days a week (except for vacations) and was on call 24/7, the market equivalent rent would be tax free; otherwise the Assoc. would have to report the market rental value as income to the IRS and the employee would have to pay income tax on it. The Assoc. does not want to be guilty of tax fraud and wants to put the requirements into the new position description.

Think I did find an answer from posting my question on a tax forum web-site:

The rules seem to be that the benefit is tax exempt if:
• The lodging is furnished for the convenience of the Association, and
• The employee is required to accept such lodging as a condition of employment, and
• The Association has a valid business purpose for providing the housing, (i.e. we need someone 24/7)

IRS Tax Code Sections 119 and 132 govern this. Perhaps someone else can use this info.