Hi everybody, My friend lives in an apartment complex. He does maintenance work and in return gets to live there for free. I think this is considered income. He said he never got any form that shows any earnings. Am I correct?
Like always thank for your wisdom,
Marion Albuquerque, NM
I believe this falls under an exchange of services within the normal course of business. (See below for an exception.) You work for me as a maintenance person and I pay you by letting you live rent free in one of my apartments. The payment is the fair rental value (FRV) of the apartment. The apt manager would be obligated to issue a 1099-MISC with the FRV in Box 7 as nonemployee compensation if the annual amount is at least $600.
How often is the 1099-misc issued... my experience in CA & NM leads me to believe.... not very often!
There is an exception to this rule. If the management company requires the worker to reside on the premises, there is no income to report. A recent thread on this newsgroup highlighted the exception for resident advisers at a college. They are required to be resident on the premises.
If he is required to live there by the job (for the convenience of the employer), then it's probably tax free.
Stu
IF this fellow were an employee of the apartment complex, i.e. getting a wage and working for them full time, then free lodging could be for the convenience of the employer, since he would have to be on call to fix things.
But such an arrangement as this, he is not an employee, and therefore an independent contractor and should be getting a 1099misc.
ChEAr$, Harlan Lunsford, EA n LA
Why wouldn't he be an employee? The employer provides the place to work and perhaps the tools. The employer tells him when and where to work, and perhaps even how. Seems like an employee to me, even though he gets no cash wages.
Stu
Granted, we could probably use some more data on the situation, like does the fellow have a regular job elsewhere? That was the impression if got. After all, he does maintenance work and gets an apartment in return. How does he pay other expenses? One of my clients, a state employee with a good salary, lives in a cottage rent free at a lake community, in return for which he serves as owner's rep in providing eyes and ears for the owner. He's not an employee and doesn't get a
1099 either.ChEAr$, Harlan Lunsford, EA n LA
I knew an accountant who had this arrangement with the general partner of a huge apartment complex. But he worked his tail off for it. He got a very nice three bedroom apartment on the top floor with a great view. When the complex went condo, he quit his regular job and took a salary for a year and a half because of the work load.
I've met several people who work in hotels/motels who have similar arrangements. The general complaint is that as good as it seems, you are immediately available whenever a problem arises. Free is never as easy as it looks.
Dick
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