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distribution of income to Caralan Trust. Caralan Trust included
in gross income both the $42,000 of rent and the $101,437 income
distribution. Since respondent disallowed Alexion Trust a
deduction for the rent paid to Caralan Trust, the same $42,000
would, but for respondent’s concession, twice be attributed to
the J. Shirleys, given respondent’s positive adjustments to their
income for both $179,791 of gross receipts and $42,000 of gross
income. Finally, since the J. Shirleys included in gross income
$13,749 of income (“NonPassive Income”) distributed to them by
Caralan Trust, and such distribution is, in turn, a distribution
of income received by Caralan Trust from Alexion Trust,
respondent concedes that he double counted when he made a
positive adjustment to their income on account of Alexion Trust’s
gross receipts without taking into account the Caralan Trust
distribution reported by them. We accept respondent’s three
concessions.
Given respondent’s concessions, we are left to consider two
adjustments: positive adjustments of $166,042 and $19,896 on
account of (1) respondent’s attribution of Alexion Trust’s gross
receipts to the J. Shirleys and (2) respondent’s disallowance of
the depreciation deduction computed by Caralan Trust and deducted
by the J. Shirleys, respectively. For the reasons that follow,
we sustain both such adjustments.
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