employer provided housing

Hello Everyone, I have an interesting case for the tax experts of the NG, I hope you can help me. I work (and get paid by) company "A" (italian) that sent me to work in the US subsidiary ("B"). As an expat living in US for >183 days, I have been declaring my worldwide income. However "B" pays the rent of the apartment where I live. The question is whether or not this rent constitutes for me taxable income or not.

The IRS normally would consider it taxable income, but there are exceptions. If they think the assignment does not change your tax home because it's temporary, then the rent is deductible. They consider it temporary if it lasts less than a year. See page 4:

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My assignment lasts more than a year, however (1) has an end date on the contract with company "A", (2) I have a non resident alien Visa; (3) most important, even if by the standard rules for travel expenses my position is considered as permanent, by the tie breaker rules in the Italy-US tax treaty my tax home remains Italy.

So, the question is: would the definition of "tax home" set on the Tax treaty override the definition set in publication 463?

thanks!

Reply to
paso.yossarian
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As I recall the one-year period isn't a safe harbor - it's in the statute. If you are in the US for more than one year, it is by law not a temporary assignment, so it doesn't get to be tax exempt.

But there is another possibility - lodging provided by the employer, on the employer's premises, as a condition of employment. There is no time requirement for that, and it applies whether or not the job is temporary or permenant.

To qualify, the place you live must be considered your employer's office, and living there must be a condition of your employment. That might be hard to qualify for in your case, but it's there nonetheless if you do qualify.

Reply to
Stuart Bronstein

Stuart listed two prongs of the three prong test for excluding the income that comes from the employer providing lodging. Besides living on the employer premises and it being a condition of your employment it also has to be for the convenience of the employer. This third test requires a direct connection between the lodging furnished by the employer and the business interests of the employer.

Reply to
Alan

Thanks for that, Alan. That's exactly correct.

Reply to
Stuart Bronstein

This one it's definitely not my case. I guess it's income no matter how I look to it. There one thing (unrelated to this rent question) I still don't understand in my situation. If I receive an audit from the IRS, how do they determine if I am declaring correctly my income? I declare the gross income from the italian company as worldwide income, I do the FBAR, etc, but not being a US employee I don't have a W2. Would they go to the extent of taking the italian paystubs, translate them, figure out what is the equivalent of the gross income, and so on?

Reply to
paso.yossarian

They might. Or they might look at your bank deposits. It really depends on the situation, and what evidence they think would help them get to the bottom of whatever it is they want to find out.

Reply to
Stuart Bronstein

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