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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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Last modified: May 25, 2011