Jonathan White resides in Lovely, Massachusetts. Lovely is a lovely town with lots of trees and public parks. Mr. White has a Ph.D. in religious studies from Guidance University and is an ordained minister of the Methodist faith. Mr. White is employed as a professor of religion at Faith University, a private 4-year school owned by the Methodist church. He loves his job and students give him excellent evaluations.

Mr. White’s salary at Faith University in 2016 is $100,000 per year (his salary has gone up $1,000 a year since 2006). On his 2016 tax return, however, Mr. White reported only $76,000 of income from Faith University and attached a written statement that said, “My house rent in Lovely, Massachusetts costs $2,000 per month.” Mr. White also attached a copy of his employment agreement with Faith University to his tax return. The employment agreement states that his annual salary is $100,000, inclusive of a $15,000 housing allowance.”

How much income from Faith University should Mr. White report on his 2016 tax return? If he is required to report less than $100,000, why is this? Would this apply to any other taxpayer?

Make sure you understand what the correct issue is. In researching the issue, you may use the following sources as a starting point:

IRC 107

Rev. Rul. 70-549

Tanenbaum v Comm’r, 58 TC 1 (1972)

Eden v. Comm’r, 41 TC 605