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Petitioners' dwelling unit, as defined in section
280A(f)(1), includes all areas of the home plus the surrounding
property. For $1,000 each month, petitioner agreed to let Roy
Farms store apple bins, apples, and farming equipment on his
property. He allowed the trucks to drive up and down the roadway
leading up to his house, and permitted use of his telephone,
bathroom facilities, and other miscellaneous areas of his home as
needed for the convenience of those working on the farm. Even if
the petitioners maintained certain areas of the house for their
exclusive use, they are still considered to have rented out their
dwelling unit for purposes of section 280A(g) because they rented
out property appurtenant to their dwelling unit. The $1,000
monthly payments represent income from the rental of their
dwelling unit for the entire year, which takes them out of
section 280A(g) because the de minimis provision only seeks to
exclude income from the rental of a dwelling unit for less than
15 days during the taxable year.
Contrary to respondent's assertion, there is economic
substance to this transaction, but it simply does not afford
petitioners favorable tax treatment. The intent of the parties
was to provide the petitioners with compensation for limited
business use of their property. Based on the record, that use
was confined to storage equipment and crops on certain areas of
his property, use of his roads, and the occasional use of his
telephone and bathroom facilities. When rented for the entire
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Last modified: May 25, 2011