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previously received a payment of $75,000 for his one-half
interest in the Fence Property as part of the Redemption
Agreement in 1991, and although he had previously gifted the
other one-half interest in the Fence Property to petitioner in
1989, he claimed at trial that he did not understand or intend
the gift.) On the $75,000 check issued to him by Lakeview on
December 30, 1992, William wrote above his endorsement that the
amount was received as payment owed for one-half interest in the
Fence Property.
Third, the surrounding circumstances do not support
petitioner's contention at trial. During the same period for
which petitioner claims William sought back rent for the Fence
Property, William also owned outright the Automotive Property
which was also being used by Lakeview. We find it implausible
that William would have demanded back rent from Lakeview for one
parcel but not the other.
Finally, petitioner has offered no evidence that $15,000, or
10 percent of appraised value, per year represented the fair
rental value of the Fence Property, or that 5 years is the
appropriate rental period. In the circumstances, we find it more
likely that the $75,000 payment was premised on one-half of the
appraised value of the Fence Property; petitioner's formula has
the appearance of an after-the-fact rationale.
Section 162(a)(3) allows a deduction for all ordinary and
necessary expenses of carrying on a trade or business, including
rentals. However, deductions are a matter of legislative grace,
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