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how to classify the friendly and informal arrangement that Monk
and Maney had reached. First, we keep the parties’ own intent
foremost in our consideration. Commissioner v. Culbertson, 337
U.S. 733, 742 (1949); Nelson v. Seaboard Sur. Co., 269 F.2d 882,
887 (8th Cir. 1959). Second, we follow the principle that “State
law determines the nature of property rights, and Federal law
determines the appropriate tax treatment of those rights.”
Knight v. Commissioner, 115 T.C. 506, 513 (2000) (citing United
States v. Natl. Bank of Commerce, 472 U.S. 713, 722 (1985),
United States v. Rodgers, 461 U.S. 677, 683 (1983), and Aquilino
v. United States, 363 U.S. 509, 513 (1960)).
First off, we need to decide whether Monk and Maney’s
initial agreement can be construed as a valid attempt to create a
lease under Maryland law. Maryland law defines a lease as “any
oral or written agreement, express or implied, creating a
landlord and tenant relationship, including any ‘sublease’ and
any further sublease.” Md. Code Ann., Real Prop. sec. 1-101(h)
(LexisNexis 2003). The terms “landlord” and “tenant” are very
broadly defined to include “any landlord” and “any tenant.” Id.
sec. 1-101(g), (m). And it is clear to us that there was a set
monthly rent that Maney paid to Monk and the allocation of
maintenance and repair expenses was understood and followed by
each of them. We therefore specifically find that Monk and Maney
had a valid oral lease. And we have previously held that valid
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