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Murray used petitioner's property as his principal
residence. Accordingly, in deciding this issue we first consider
whether the rent charged Murray reflects a fair rental for the
property.
1992 Activity
Petitioner testified that she had a written agreement
defining the rental terms with Murray, and that his girlfriend
and child lived in the house until January 1993. Petitioners did
not, however, produce the rental agreement at trial.
Furthermore, petitioners did not report any income or expenses
with respect to this activity on their 1992 return, or provide
any business records or other evidence to substantiate receipt of
the rental amounts. Finally, petitioners did not call Murray or
his girlfriend to verify that they rented the house according to
the terms petitioner alleges.
Petitioner husband testified that petitioner spent
considerable time preparing the house for her brother to rent,
that he overheard the amount of rent that petitioner and Murray
agreed upon, and that it was his understanding that petitioner
did receive the rent on a regular basis. Conversely, petitioner
husband testified that he was not involved in anything to do with
the property, that he was uncertain of when Murray moved in or
out, and that he visited the house once while Murray was there
but he was uncertain when that was.
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