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Physicians and a dentist working at the medical center paid
rent to Dr. Rao either every time they came in for a session, or
on a monthly basis. The medical center is still available for
rental to physicians. Petitioner rented the upstairs portion to
the Forest Park Senior Citizens Center since May of 1986.4
In order to calculate the medical center's expenses, as
reported on Schedule E, Mr. Raclaw conferred with Dr. Rao to
determine his monthly expenses for medical supplies, utilities,
paper goods, other supplies, and payments to an assistant who
worked there.
Petitioners reported the medical center's gross income and
deductions and claimed the following losses on Schedules E for
the years in issue:
1986 1987 1988
Rents received $45,000 $46,800 $104,550
Expenses:
Advertising 950 --- ---
Auto & travel 600 240 ---
Cleaning & maint. 1,100 2,400 3,750
Insurance 2,628 2,782 3,175
Mortgage interest 59,719 16,182 58,196
Repairs 7,558 3,100 9,202
Supplies 3,600 2,000 2,186
Taxes 6,698 6,811 12,191
Utilities 5,951 6,000 5,510
Telephone 1,118 1,263 2,489
Office expense 2,370 4,185 2,680
Salary 12,000 12,000 12,000
Water 422 512 1,580
4 This lease was entered into through Dr. Rao's
corporation, Kondamudi.
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