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1. Whether petitioner may deduct as management fees
$284,300, $699,359, and $738,239 for fiscal years 1989, 1990,
and 1991, respectively, as petitioner contends; $57,159,
$149,175, and $155,559, as respondent contends; or some other
amount. We hold that petitioner may deduct 75 percent of the
management fees it paid for those years, i.e., $213,000,
$525,000, and $554,000.
2. Whether (or to what extent) petitioner may deduct rent
it paid to its sole shareholder for the sublease of property in
excess of the rent its sole shareholder paid for the prime lease
of the property. Petitioner contends it may deduct rent of
$216,000, $250,000, and $264,000 for fiscal years 1989, 1990, and
1991, respectively. Respondent contends petitioner may deduct
rent of $97,975 for each of those years. We hold that petitioner
may deduct rent of $120,087, $124,896, and $129,891 for fiscal
years 1989, 1990, and 1991, respectively.
Section references are to the Internal Revenue Code in
effect for the years in issue. Rule references are to the Tax
Court Rules of Practice and Procedure. Unless otherwise stated,
references to years are to calendar years and references to
fiscal years are to petitioner's fiscal year, which ends on March
31.
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