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v. Commissioner, 165 F.2d 483, 484 (5th Cir. 1948), affg. 7 T.C.
1129 (1946); Levenson & Klein, Inc. v. Commissioner, 67 T.C. 694,
715 (1977). When the lessor and the lessee are related, however,
the lessee's deduction for rent is limited to the rent it would
have paid had the terms of the lease been reached at arm's
length; i.e., the lessee's deduction is limited to the premises'
fair rental value. Sparks Nugget, Inc. v. Commissioner, 458 F.2d
631, 635 (9th Cir. 1972), affg. T.C. Memo. 1970-74; Levenson &
Klein, Inc. v. Commissioner, supra at 715; see also Milbrew, Inc.
v. Commissioner, supra at 1308. Fair rental value is a factual
determination, Utter-McKinley Mortuaries v. Commissioner,
225 F.2d 870, 872-873 (9th Cir. 1955), affg. a Memorandum Opinion
of this Court, and petitioner bears the burden of proof, Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Close
scrutiny of the facts is appropriate here because the lessee
(petitioner) and the lessor (the Schwalbachs) are related.
Ingle Coal Corp. v. Commissioner, 174 F.2d 569, 571 (7th Cir.
1949), affg. 10 T.C. 1199 (1948); Limericks, Inc. v.
Commissioner, supra at 484; Estate of Schneider v. Commissioner,
88 T.C. 906, 938 (1987), affd. 855 F.2d 435 (7th Cir. 1988).
We are satisfied that petitioner paid the Schwalbachs fair
rental value for the River Falls building. In the respective
years at issue, petitioner's rental rate equaled no more than
$17.53 and $17.26 per square foot ($63,113/3,600 sq. ft. and
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