Email from Client. From: Hotel Owner To: You Subject: Help for new manager

Our new manager, Isabelle, earns $75,000 a year as the manager of a remote hotel in a land far, far away (but still in the U.S.). In addition to her pay she also receives free lodging at the hotel. A year- round guest would have to pay $50,000 to stay at our hotel. For Isabelle to effectively perform her duties as the manager, we need her to live at the hotel, and our employment contract says as much. Just so we can answer her questions, can you help with the following?

Will she be taxed on the free lodging she receives as hotel manager? Why? What if she brings her spouse and children to stay at the hotel? Why? What if she can choose between $25,000 in more pay or staying at the hotel? Why? Thanks!