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payments or income to petitioner. Conversely, respondent allowed
Olympic an additional $62,788.89 deduction.
Discussion
Rents are includable in gross income. See sec. 61(a)(5).
Respondent determined that during 1992 petitioner received more
rental income than it reported. An analysis of petitioner’s
deposits reflected that various payments were made from Olympic
to petitioner. These amounts represented both loan repayments
and equipment rental payments. Petitioner admits that Olympic
rented petitioner’s pumping equipment but alleges that all of the
$125,576 in deposits to its account from Olympic represented loan
repayments of principal, which are not includable in income.
Further, the lease agreement between petitioner and Olympic
called for monthly rental payments of $11,681.41, or $140,176.92
annually. The schedule of payments from Olympic to petitioner
reflects that the total monthly payments approximated the
$11,681.41 monthly amount called for in the lease. Combining the
$64,839 reported by petitioner and the $62,789 determined by
respondent would result in petitioner’s reporting $127,627, or
$12,549.92 less than the $140,176.92 called for by the terms of
the lease. Petitioner contends that respondent’s determination
is arbitrary but has offered no evidence that would show that it
is in error.
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