Leslie A. and Betsy M. Roy - Page 5

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               Respondent disallowed deduction of any expenses or                     
          depreciation on the grounds that section 280A(c)(6) denies                  
          deduction when an employee rents a residence to his employer for            
          business purposes, and respondent disallowed exclusion under                
          section 280A(g)(2), arguing that the $12,000 was not de minimis             
          rental income.  Rather, respondent argues that petitioners rented           
          their residence to Roy Farms for $1,000 a month, who subsequently           
          leased it back to petitioners rent free as farm housing.2                   
          Because this alleged leasing agreement provided for rental of               
          petitioner's home for more than 15 days during the taxable year,            
          the exclusion for de minimis use of their property, respondent              
          argues, does not apply.                                                     
               Petitioner contends that even if respondent's position were            
          true, section 280A(g)(2) works to exclude the $1,000 payments               
          from Roy Farms as rental income because the payments are                    
          significantly below the fair rental value of the residence, and             
          thus the petitioners have not actually rented out their dwelling            
          unit but have maintained exclusive personal use of the house as a           
          residence for the entire taxable years at issue.                            
                                     Discussion                                       
               Generally, a taxpayer may not deduct expenses incurred from            
          the rental use of a personal residence or any portion thereof.              


               2We decline to address the application of sec. 119 to                  
          petitioners, as this issue was not raised by either party                   
          anywhere in the record.                                                     



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