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return, petitioner offset the amount claimed as a management fee
expense by the amount of the rent credit received.
During 1979 petitioner computed a management fee payable to
CDC in the amount of $67,943 in a similar manner. However,
petitioner failed to offset the amount claimed as a management
fee expense by the rent credit, which was $16,269. Petitioner
also did not report the rent credit as rental income on his 1979
tax return. The computation of the management fee for 1979 lists
two accounts payable to CDC in the amounts of $44,475.29 and
$7,198.69.
Petitioner has not substantiated that the alleged management
fees claimed in 1978 and 1979 to CDC were actually paid.
Although petitioner's cash disbursements journal for 1978 lists a
number of payments to CDC, the purpose for most of the payments
is not identified, and none of the listed payments match the
amounts reflected in Exhibit 3138. Furthermore, during 1978 CDC
owed petitioner $1,303,460 for loans or similar debts. Certain
other payments reflected in the 1978 disbursements journal are
listed under a column identified as rent. These amounts pertain
to the deduction claimed on petitioner's Schedule C for 1978 rent
expense of $31,842.
During 1979 petitioner did not issue any checks to CDC in
payment of the claimed management fees. The cash disbursements
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