- 6 -
Total 33,138
After this sale, Wysong Corp. owned and operated all the
equipment, furniture, and fixtures in the Eastman Building. Both
corporations operated out of the Eastman Building under the
following arrangement: Wysong Corp. paid Wysong Medical for its
research and development activities conducted on behalf of Wysong
Corp., and pursuant to the lease agreements, Wysong Medical paid
Wysong Corp. for the use of the latter's facilities. Also, all
employees of Wysong Medical became employees of Wysong Corp.
On Wysong Medical's 1992 and 1993 tax returns, it deducted
rent paid to Wysong Corp. in the amounts of $92,087 and $46,000,
respectively. Wysong Medical also deducted on these returns
"other deductions" of $91,502 and $52,207: in 1992, "other
deductions" include $1,000 for legal and accounting costs,
$70,000 in commissions, $9,000 for equipment rental, $43 in fees,
$3,386 for auto/travel, $7,913 for utilities, and $160 for
refunds; in 1993, "other deductions" include $218 in fees,
$48,309 in contract work, and $3,680 for utilities.
In the notice of deficiency, respondent determined that the
amounts claimed as rent deductions by Wysong Medical exceeded
reasonable amounts for rent within the meaning of section
162(a)(3). Using the square footage identified in the lease
agreements, respondent computed Wysong Medical's allowable rent
deduction at $13 per square foot (500 times $13; 250 times $13).
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Last modified: May 25, 2011