Chester F. and Faye L. Sidell - Page 22

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              In enacting section 469, Congress was specifically concerned           
          with both related party leases and the possibility of abuse by the          
          formation of closely held corporations.  See, e.g., sec. 469(e); S.         
          Rept. 99-313, at 714 (1986), 1986-3 C.B. (Vol. 3) 1, 713-714; H.            
          Conf. Rept. 99-841 (Vol. II), at II-147 (1986), 1986-3 C.B. (Vol.           
          4) 1, 147; 53 Fed. Reg. 5686, 5694 (Feb. 25 1988).  On brief,               
          petitioners assert that no potential for abuse exists in this case          
          because they own no tax shelters. They claim that their Lawrence,           
          Massachussetts, properties are the only rental properties they have         
          and that these properties are either contiguous to or located               
          across the street from each other.  Moreover, petitioners maintain          
          that ownership of the real properties was separated from the                
          business of KGR for valid business reasons--to insulate the                 
          properties from potential liabilities arising from the operation of         
          KGR's business and to insulate KGR from potential liabilities               
          arising from the ownership of the property.  In addressing these            
          assertions, respondent states on brief:                                     
                    The petitioners' assertion that no abuse potential                
               is present in the present case because they own no "tax                
               shelters" begs the question. Furthermore, the                          
               unquestioned legitimate business needs that prompted the               
               purchases of the various properties that caused                        
               petitioners to incur losses do not mean that the                       
               petitioners' case is not the sort against which the                    
               strictures of section 469 should be aimed. * * *                       
                    The self-rental rule as a matter of administrative                
               convenience is a bright line rule.  The rule does not                  
               look to a taxpayer's motives in structuring transactions.              

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