Vashon C. and Beverly C. Jackson - Page 3




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               Petitioners purchased the residence of petitioner wife's               
          parents, Mr. and Mrs. Charity, and her maternal grandmother (the            
          Charitys) in 1987.  This residence is located at 2117 Hollins               
          Court.  The Charitys continued to use 2117 Hollins Court as their           
          residence after the sale and paid petitioners rent for such use.            
               The first issue for decision is the amount of rents received           
          by petitioners during the taxable years in issue.                           
               On Schedules E attached to their 1990, 1991, and 1992                  
          returns, petitioners reported "rents received" from 2117 Hollins            
          Court in the amount of $7,200 per year.  This amount is equal to            
          the fair rental value appraisal of 2117 Hollins Court obtained by           
          petitioner in 1988 from Eagle Realty, a local real estate agency.           
          In the statutory notice of deficiency, respondent determined that           
          petitioners received rents from 2117 Hollins Court during 1990,             
          1991, and 1992 in the amounts of $8,400, $8,400, and $11,700,               
          respectively.                                                               
               Section 61(a) includes in gross income all income from                 
          whatever source derived including, but not limited to, rents.               
          See sec. 61(a)(5).                                                          
               Petitioner husband testified that the Charitys paid $500 per           
          month as rent during the taxable years in issue.  He further                
          testified that petitioners reported their "rents received" on               
          their tax returns as $7,200 per year ($600 per month), on the               
          advice of one of respondent's revenue agents, in order to satisfy           






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