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Schwalbach and Dr. Knotek. Dr. Schwalbach and Dr. Knotek also
referenced a professional publication of the American Dental
Association, looking specifically at a rent factor guideline
stated therein. Dr. Schwalbach and Dr. Knotek's discussions
ended on or near January 1, 1992, when Dr. Knotek purchased from
Dr. Schwalbach 50-percent interests in petitioner and its office
equipment.
Contemporaneously therewith, on January 1, 1992,
Dr. Schwalbach and Dr. Knotek, in their capacities as officers of
petitioner, signed a lease with the Schwalbachs under which the
Schwalbachs relet to petitioner the building's parking lot and
the 3,600-square-foot area that it already occupied for a 5-year
term ending on December 31, 1996. Petitioner agreed to pay the
Schwalbachs $4,500 per month, plus pay all utilities that it
used, all insurance on the building, and all real estate and
personal property taxes that were related to the building.
Real estate taxes paid in 1992 through 1994 totaled $8,777,
$9,113, and $8,153, respectively.
In 1993, Dr. Schwalbach relet to Dr. Nelson the
1,200-square-foot space that he already occupied for a 5-year
term ending May 31, 1998, at a rate of $8,400 per year (i.e.,
$7 per square foot). Dr. Nelson practiced full time in Hastings,
Minnesota, and he used the leased space 1 day a week; petitioner
had the right to use the space when Dr. Nelson did not. Dr.
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