Sheryl D. Bumpus - Page 5




                                        - 5 -                                         
                                       OPINION                                        
               The rent deduction claimed on petitioner's return is                   
          attributable to the lease and takes into account:  (1) The                  
          security deposit; (2) rent for the first month; and (3) the lease           
          cancellation fee.  The balance of the deduction ($6,000) has not            
          been identified.  The controversy between the parties focuses on            
          whether petitioner is entitled to include the lease cancellation            
          fee in the rent deduction.                                                  
               Although the lease cancellation fee was paid with a                    
          cashier's check purchased by Mr. Finley, petitioner considers               
          that the payment was made by her.  According to petitioner, she,            
          in effect, borrowed the funds from Mr. Finley and repaid him over           
          a period of time.  Petitioner contends that the deduction is                
          allowable under section 162,1 which, in general, allows a                   
          taxpayer to deduct "all the ordinary and necessary expenses paid            
          or incurred during the taxable year in carrying on any trade or             
          business."                                                                  
               Respondent argues that petitioner is not entitled to a                 
          deduction for the lease cancellation fee because the fee was not            
          paid by her.  According to respondent, the fee was paid by Mr.              
          Finley as the guarantor on the lease.  Respondent further argues            
          that the fee, even if paid by petitioner, was an expense of                 


          1Section references are to the Internal Revenue Code of                     
          1986, as amended and in effect for the year 1995.  Rule                     
          references are to the Tax Court Rules of Practice and Procedure.            




Page:  Previous  1  2  3  4  5  6  7  8  Next

Last modified: May 25, 2011