What are the requirements for a section 119 exclusion?
The New York Times reported last month that some museum executives in Manhattan receive tax-free housing because the museum classifies their apartments as “business premises”. (Plum Benefit to Cultural Post: Tax-Free Housing by Kevin Flynn and Stephanie Strom. August 9, 2010.) Tax experts cited in the article disagree as to whether the museums’ reliance on the “business premises” tax exclusion is advisable.
Normally, an employee must pay income tax on the fair market value of rent on housing that the employer provides. However, under section 119 of the Internal Revenue Code (IRC), the employee may exclude the value of housing from her income if the employee must live on the employer’s “business premises.” IRC Regulation §1.119-1(b) states that the Section 119 exclusion is permissible if all three of the following conditions are satisfied:
1. The employee’s residence is located on the employer’s business premises.
2. The employer furnishes the residence for its own convenience.
3. The employee must accept the residence as a condition of
The question is? Did Tom Schwab pay taxes on the house stipend he received from the City of Grand Terrace? Was the sale of a City Owned Property to Tom Schwab a legal transaction. His employment was not conditional on his acceptance of the house. The then City Council did not say to Tom Schwab live in Grand Terrace and accept this house or you lose your job you already have. In addition to prove this point. Tom Schwab was already employed with the city without a requirement that he live in Grand Terrace. The Current City Manager was not told she had to live in the City of Grand Terrace as a condition of employment.
Sure Tom Schwab is gone. However, the question of potential unpaid taxes, or undeclared income is a civic concern when tax dollars are much needed. In addition the past manipulation of the council and the sale of an RDA home to the City then the City to Schwab smacks of an illegal transfer of government property to Tom Schwab and thus a possible criminal act on his part and on the part of those who conspired to bring about the transfer of government assets to Mr. Schwab. It is clear DA Ramos has no interest in addressing the State and possible Federal Laws that were violated in the transaction. Perhaps the IRS and FBI and the State AG can be reminded that this issue has not been fully tried in a court of law.