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home and were not deductible as payments for business expenses
paid or incurred while away from home.
Moreover, transactions among family members that result in
the distribution of income within a family unit “are subject to
the closest scrutiny.” Van Zandt v. Commissioner, 40 T.C. 824,
830 (1963), affd. 341 F.2d 440 (5th Cir. 1965); Coombs v.
Commissioner, T.C. Memo. 1984-366. A transaction that is entered
into solely for the purpose of tax reduction and which has no
economic or commercial objective to support it is a sham and
without effect for Federal income tax purposes. See Rice’s
Toyota World, Inc. v. Commissioner, 81 T.C. 184 (1983), affd. in
part and revd. in part 752 F.2d 89 (4th Cir. 1985).
We find that petitioners’ supposed rental agreement was
solely motivated by tax concerns and not by any commercial or
financial objectives. Mr. Bittner alleges that he paid rent to
his wife by giving her promissory notes and that he paid such
notes when he deposited revenue from his acting career into
petitioners’ joint checking account. Petitioners do not assert
that Mr. Bittner’s supposed business use of the apartment
prevented Mrs. Bittner from using or enjoying the apartment.
Instead, petitioners concede that Mrs. Bittner occupied the
apartment when she was employed at the hospital. Contrary to
petitioners’ assertions, these circumstances merely demonstrate
that Mr. Bittner contributed to maintaining petitioners’ marital
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