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ics (new Building). They did not claim depreciation either on
the Building that they purchased on September 6, 1984, or on the
new Building that they purchased in 1991. In its corporate
returns for the taxable years ended January 31, 1990, January 31,
1991, January 31, 1992, and January 31, 1993, Dieter Electronics,
with the full knowledge and consent of Mr. Daimler and Ms.
Mondragon, improperly deducted depreciation in the amounts of
$15,789, $15,789, $25,659, and $25,659, respectively, on the two
buildings personally owned by Mr. Daimler and Ms. Mondragon.
During the years 1989 through 1992, Mr. Daimler and Ms.
Mondragon had a lease agreement (office lease) with the Company
with respect to either the Building or the new Building (collec-
tively, office buildings) that they owned and that housed Dieter
Electronics’ place of business. The office lease required Dieter
Electronics to pay them rent in the amount of $2,500 per month
(i.e., $30,000 per year). During 1990, 1991, and 1992, the
Company paid Mr. Daimler and Ms. Mondragon $27,500, $28,450, and
$36,500, respectively, as rent on the office buildings. Mr.
Daimler and Ms. Mondragon did not include rental income under the
office lease in the amount of $30,000 per year in their joint
returns for 1989, 1990, 1991, and 1992. Dieter Electronics did
not deduct rental expense in that annual amount in its corporate
returns for the taxable years ended January 31, 1990, January 31,
1991, January 31, 1992, and January 31, 1993.
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