6
Wilfong v. United States, 991 F.2d 359, 364 (7th Cir. 1993);
Sokol v. Commissioner, supra at 767; Wasie v. Commissioner, 86
T.C. 962, 969 (1986). The fact that respondent did not prevail
in the underlying litigation does not require a determination
that respondent's position was unreasonable, Broad Ave. Laundry &
Tailoring v. United States, 693 F.2d 1387, 1391 (Fed. Cir. 1982);
however, it remains a factor to be considered, Heasley v.
Commissioner, 967 F.2d 116, 120 (5th Cir. 1992), affg. in part
and revg. in part T.C. Memo. 1991-189; Estate of Perry v.
Commissioner, 931 F.2d 1044, 1046 (5th Cir. 1991); Powers v.
Commissioner, 100 T.C. 457, 471 (1993).
Respondent's position was that petitioners were not entitled
to deduct a rental expense of $18,000 on the Schedule C for the
law practice of Mr. Cox because, under section 162(a)(3), Mr. Cox
is not permitted to deduct payments attributable to property in
which he owns an equity interest. Respondent contended that by
deducting the rental payments as ordinary and necessary business
expenses and reporting a corresponding amount as rental income on
their Schedule E, petitioners were converting ordinary income
into passive income to take advantage of what otherwise would be
unused passive losses under section 469. Respondent also argued
that because petitioners filed a joint return, they are precluded
from reallocating income among one taxable unit. Petitioners
argued that a tenancy by the entirety exists as a separate legal
entity with which Mr. Cox's law practice may contract, and, thus,
their deduction of the rental payments should be allowed.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011