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property. Among other things, petitioners argue that the
reasonableness of Wysong Medical's rent is evidenced by the
proportionally similar income and losses reported by both the
lessor and the lessee. For example, in 1992, Wysong Medical's
total deductions represented approximately 101 percent of its
gross income, whereas Wysong Corp.'s total deductions represented
approximately 99 percent of its gross income. Petitioners
contend that this balancing of income and losses was done by
design, and that this proportionality establishes that there was
no improper shifting of income.
Respondent argues that Wysong Medical's payments were not
reasonable in light of all the facts and circumstances. First,
and using the square footage identified in the lease agreements,
respondent argues that parties in an arm's-length transaction
would not have agreed to rent office space at $184 per square
foot when the prevailing rate in the area was $13 per square
foot. Second, respondent argues that the amount of rent paid by
Wysong Medical was not reasonable in relation to the business
activities of the two corporations. In 1992 and 1993, Wysong
Medical's gross receipts were $147,341 and $100,537,
respectively; whereas Wysong Corp.'s gross receipts were
$2,436,888 and $2,666,759 in 1992 and 1993, respectively. Yet,
the amount of rent paid by Wysong Medical represented 69 percent
and 35 percent of the total rent paid by Wysong Corp. in 1992 and
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