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land and without consideration of any improvements made thereon.2
Further, the option to rent the land for an additional 50 years
contains no provision for a corresponding increase in rent or
reference to establishing the rent in accordance with a then-
current fair rental value, and the option to purchase the land
contains no terms or objective measurement by which to do so. We
also find that Mr. Spera and GRC did not take adequate steps to
determine the fair rental value of the 1.28 acres of land. Among
other things, Mr. Spera made no effort to determine what the
prevailing rental rate was for similar parcels of property in the
same locale. See Weigel v. Commissioner, supra.
Second, we find that GRC and petitioners did not intend to
honor the terms of the lease. GRC did not pay and petitioners
did not receive any rent during the years in issue.3 We also
note that, contrary to the lease, petitioners paid all town
taxes, school taxes, and other expenses for 1987 through 1992.4
2 We have calculated this 30-percent return using basic
present value formulae.
3 Petitioners argue that the parties to the lease never
intended for rental payments to commence prior to the issuance of
the certificate of occupancy. Further, petitioners claim that
GRC began making rent payments in 1995, after the certificate of
occupancy was issued on Aug. 22, 1995. Given the fact that no
rental receipts were reported on petitioners' 1995 Federal income
tax return, we are not persuaded by petitioners' argument.
4 Although the record shows that GRC did make a series of
payments to Mr. Spera during 1990 through 1992 for the stated
purpose of paying taxes on a "barn" and "Ashland", we are unable
(continued...)
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