Hunt & Sons, Inc. - Page 5




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          expensive to clean up.  In the mid-1980s, government regulators             
          in California imposed strict new regulations on operators of                
          underground storage tanks, requiring the use of double-wall                 
          tanks, double-wall piping, tank-monitoring devices, and leakage             
          alarms.  Government regulators also require annual testing of the           
          systems to prevent or minimize soil, groundwater, and air                   
          pollution. Petitioner spent $60,000 to clean up a leak at its               
          Roseville Road site and has incurred expenses of more than                  
          $500,000 to clean up contamination at its Placerville plant.                
               Petitioner paid and deducted the following amounts as rent             
          during 1996 and 1997 with respect to its cardlock locations:                
                   Property                1996            1997                       
                  Watt Avenue           $120,000        $120,000                      
                  Mosquito Road    55,200               53,400                        
                  Roseville Road        48,000          54,000                        
                  White Rock Road        54,000         55,500                        
                  Mother Lode Drive     27,600          28,800                        
                  Fee Drive             --               116,000                      
                  Total                 304,800         327,700                       
                  1The Fee Drive property was leased for only                         
                  4 months in 1997, at a rent of $4,000 per                           
                  month.                                                              
               The annual fair market rental value for both 1996 and 1997             
          of Watt Avenue was $89,700 and of Mother Lode Drive was $29,900.            
          The fair market rental value of Fee Drive for the 4 months of               
          1997 (during which the property was leased to petitioner) was               
          $10,400.  Respondent offered no evidence to contradict                      
          petitioner’s and petitioner’s experts’ testimony that petitioner            







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