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OPINION
Petitioners did not report income from rent or claim
deductions for interest or depreciation in connection with Volm’s
use of the first floor and part of the second floor of the Branch
property.2 Petitioners claim an overpayment of the tax paid for
1993 based on the excess of deductions over the income that they
did not report or claim. With respect to the deficiency
determined, respondent concedes that petitioners would owe no
additional tax for 1993, even if their overpayment was not
allowed.
Respondent does not dispute the fact that petitioners paid
the interest totaling nearly $90,000. We have found the
allocable percentages of business and personal use of the realty
and the allocable percentages of the purchase price attributable
to the land and building. The parties have couched the issue for
our consideration solely in the context of whether petitioners
rented a portion of the Branch property to Volm’s.3 If we decide
2 In the context of the taxable year before the Court,
petitioners’ failure to report income attributable to Volm’s
payments of taxes, utilities, and expenses does not preclude the
possibility of an overpayment. That is so because petitioners
also failed to claim deductions in amounts far in excess of the
amount of any unreported income attributable to Volm’s payments.
Accordingly, unreported income would “wash” with the unclaimed
deductions, leaving sufficient amounts to generate the
overpayment sought by petitioners.
3 Although the fact pattern in this case could easily have
generated issues concerning investment interest, passive loss
(continued...)
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Last modified: May 25, 2011