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In the case at hand, the witnesses to the conversations were
equally available to petitioner and respondent. Petitioner was
not required to call witnesses to corroborate the testimony it
offered. If respondent did not believe the testimony, he should
have called witnesses or taken other discovery to impeach Mr.
Hunt’s testimony. Respondent offered no evidence to call into
question the truth of Mr. Hunt’s testimony.
In addition, the magnitude of the discrepancy is not nearly
as significant as it was in Duplicating Supply Co. v.
Commissioner, supra. We have found that petitioner overstated
rent on only two of the six properties and charged as total
annual rent less than 20 percent of what we have found (and what
respondent’s expert claimed) to be the fair market value of these
properties.13 Petitioner’s rental payments exceeded the fair
market rental value of the Watt Avenue property by approximately
33 percent and the Fee Drive property by approximately 53
percent. While petitioner did overstate rental deductions on
these two properties, we do not find that the overstatements were
of sufficient magnitude to mandate a determination that
petitioner was negligent in setting the rents. We therefore
13In 1996, petitioner charged rent of $120,000 for Watt
Avenue on a value of $690,000, resulting in a rental rate of 17
percent of value. In 1997, petitioner charged $120,000 in rent
for Watt Avenue and annualized rent of $48,000 on Fee Avenue, for
total rent of $168,000 on a value of $930,000 or approximately 18
percent of value.
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