I work for a guest ranch and on our property we have employee housing. The housing consists of 1 & 2 bedroom apts, as well as studios. Several employees are currently living in these apts free of rent while others pay rent. Those that live in the apts for free are on-call as a manager on duty 1 or two days a week - thus justifying their free rent. Should they be paying taxes on this "free rent"?

The way my state does it is if no money exchanges hands they are not required to pay taxes on it.

That varies from state-to-state.

The IRS would consider the "free" rent compensation and assess a tax on it IF they knew about it, which they probably do not.

The answer is that it depends. If they have to be on site to do their job then the rent may not be income (think of a manager who is required to live on site at an apartment complex etc). But it does not sound like that is the case here, in which case the rent not paid is income.

TTE has a point about the apartment manager. However, IMHO, the ON-CALL requirement by itself is NOT enough to make the freerent non-income.