- 8 -
length transaction with an unrelated party. See Southeastern
Canteen Co. v. Commissioner, 410 F.2d 615, 619 (6th Cir. 1969),
affg. in part and revg. in part T.C. Memo. 1967-183; Place v.
Commissioner, 17 T.C. 199, 203 (1951), affd. per curiam 199 F.2d
373 (6th Cir. 1952); see also Maschmeyer's Nursery, Inc. v.
Commissioner, T.C. Memo. 1996-78. The close relationship in the
present case is evident. Dr. Wysong was the sole shareholder of
both corporations, and whatever negotiations took place were
between Dr. Wysong and himself. Furthermore, Dr. Wysong signed
the lease agreements on behalf of both the lessor and the lessee.
The entire record supports the fact that there were no
arm's-length negotiations between the two entities. We closely
scrutinize related party transactions, and to the extent that
rent paid by a lessee to a related lessor is excessive, a rental
deduction will be disallowed. The question of whether rental
payments are reasonable is one of fact. Many factors may be
considered, such as the terms and conditions of the lease and the
facts and circumstances surrounding the signing of the lease.
See Audano v. United States, 428 F.2d 251, 256 (5th Cir. 1970);
Commissioner v. Lincoln Elec. Co., 176 F.2d 815, 817 (6th Cir.
1949); see also Alondra Indus., Ltd. v. Commissioner, T.C. Memo.
1996-32. No one factor is dispositive.
Petitioners argue that the claimed rent was reasonable
because the parties to the lease agreements intended to convey
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011