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Rental Income Issue
During 1988, Air America and IL NA Tours occupied space on
the first and second floors, respectively, of the Lincoln Avenue
I property. On their 1988 returns, Air America deducted $12,425
and IL NA Tours deducted $41,127 for rent in the “Other
deductions” category on the returns. In addition, IL NA Tours
deducted $41,127 in the “Rent” category of its return.54
On his 1988 return, petitioner reported $10,430 in rental
income relating to the Lincoln Avenue II property but did not
report any rental income relating to the Lincoln Avenue I
property. During the examination of petitioner’s 1988 return,
petitioner told the revenue agent conducting the examination that
the amounts deducted for rent by Air America ($12,425) and IL NA
Tours ($41,127), in total $53,552, were for the use of space in
the Lincoln Avenue I property. In the notice of deficiency
respondent determined that petitioner had unreported income of
$43,123 relating to rental income attributable to the Lincoln
Avenue I property.55
54 Respondent has not put in issue any additional income
that might be associated with the duplicative $41,127 deduction.
55 The revenue agent had erroneously subtracted the $10,430
rental income reported on petitioner’s return relating to the
Lincoln Avenue II property from the $53,552 in unreported rental
income relating to the Lincoln Avenue I property. Respondent has
not amended the answer further to include the additional
unreported rental income.
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