2013 (Taxation) Bar Exam Questions: Multiple Choice Question 10

[Discuss/answer the question below. Or see Taxation Instructions; Taxation Essay Questions: 12, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12; Taxation Multiple Choice Questions: 1, 2, 3, 4, 5, 6, 7, 8, 911, 12, 13, 14, 15, 16, 17, 18, 19 and 20; See also 2013 Bar Exam: Information, Discussions, Tips, Questions and Results]

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PRT Corp. purchased a residential house and lot with a swimming pool in an upscale subdivision and required the company president to stay there without paying rent; it reasoned out that the company president must maintain a certain image and be able to entertain guests at the house to promote the company’s business. The company president declared that because they are childless, he and his wife could very well live in a smaller house.

Was there a taxable fringe benefit? (1%)

(A) There was no taxable fringe benefit since it was for the convenience of the employer and was necessary for its business.

(B) There was a taxable fringe benefit since the stay at the house was for free.

(C) There was a taxable fringe benefit because the house was very luxurious.

(D) There was no taxable fringe benefit because the company president was only required to stay there and did not demand free housing.

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