- 6 -
Total 37,912 36,840
Petitioner also claimed a $2,184 NOL deduction on its 1993
tax return. The return stated that petitioner had sustained a
$13,647 NOL in 1992, that it carried back $11,463 of this loss to
1989, and that it was carrying forward the rest to 1993.
Respondent disallowed this deduction because, respondent
determined, petitioner had not proven its right to it.
OPINION
We must first decide whether the rent (inclusive of the real
estate taxes) that petitioner paid the Schwalbachs for the River
Falls building equaled the fair rental value of the premises.1
Respondent determined it did not. Respondent argues that the
fair rental value of the leased premises is $7 a square foot, as
evidenced by the rental rate that the Schwalbachs charged Dr.
Nelson for a portion of the same building. Petitioner argues
that the rent charged Dr. Nelson is not representative of fair
rental value and that it may deduct all the rent it paid the
Schwalbachs.
We agree with petitioner. Generally, a taxpayer may deduct
reasonable rent paid for property used in a trade or business.
Sec. 162(a)(3); Milbrew, Inc. v. Commissioner, 710 F.2d 1302,
1308 (7th Cir. 1983), affg. T.C. Memo. 1981-610; Limericks, Inc.
1 The parties have treated the real estate taxes paid by
petitioner as additional rent. We do likewise.
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