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paid fair market rental value for the other properties (Mosquito
Road, Roseville Road, and White Rock Road).
ULTIMATE FINDINGS OF FACT
1. Petitioner paid the following amounts to its
shareholders in excess of the fair rental value of the
properties:
Property 1996 1997 Total
Watt Avenue $30,300 $30,300 $60,600
Fee Drive -- 5,600 5,600
Total 30,300 35,900 66,200
Petitioner paid fair market rental value for the other cardlock
properties.
2. Petitioner’s payments in excess of the fair market
rental value of the properties are not deductible in computing
taxable income.
3. Petitioner was not negligent in deducting rent in excess
of the fair market rental value of the Watt Avenue and Fee Drive
properties.
OPINION
The parties agree that potential for abuse is inherent in
rental transactions between a corporation and its shareholders.
As we stated in Wy’East Color v. Commissioner, T.C. Memo.
1996-136:
A taxpayer generally may deduct reasonable rents
paid for property used in a trade or business. A
taxpayer who rents property from a related person may
not deduct more than he or she would have paid if the
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