Kleinwachter's conundrum imagines two equally salaried employees: an ordinary military officer and a flügeladjutant (a regimental aide-de-camp) to the sovereign.
First, imagine that the flügeladjutant "receives quarters in the palace, food at the royal table, servants, and horses for sport.
He accompanies the prince to theatre and opera, and, in general, lives royally at no expense to himself and is able to save generously from his salary."
[2] Simons laments that the problem this example poses to equitable taxation "is clearly hopeless": To omit all compensation in kind is clearly inappropriate.
Because it is difficult to measure actual utility from personal consumption (which includes in-kind benefits consumed by employees, but also leisure time, and the imputed income from self-performed services and ownership of consumer durables), tax policy seeks to sensibly and fairly delimit the concept of income in the context of the taxation of in-kind benefits by developing guidelines that balance equity, neutrality, and administrability.