Question: Ridge is the manager of a motel. As a condition of his employment, Ridge is required to live in a room on the premises so that he would be there in case of emergencies. Ridge considered this a fringe benefit, since he would otherwise be required to pay $800 per month rent. The room that Ridge occupied normally rented for $70 per night, or $2, 100 per month. On the average, 90% of the motel rooms were occupied. As a result of this rent-free use of a room, Ridge is required to include in gross income.
a. $2, 100 per month
b. $1, 890 ($2, 100 times .90)
c. $0
d. $800 per month
e. None of these choices are correct.