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Weeldreyers included only their 60 percent of the crop revenues
in their income. They excluded the entire 40 percent paid to
Dreyer Farms as rent, including the portion attributable to the
farmhouse. In effect, they deducted the portion of the rent paid
for the farmhouse. The rent of the farmhouse is their personal
expense and is not deductible. See sec. 262.
The farm leases do not specify that portion of the rent to
be paid for use of the farmhouse. Nor have the Weeldreyers
provided any evidence to show that portion of the rent properly
attributable to the farmhouse.
The amount of the constructive dividends respondent
determined in the Weeldreyer notice of deficiency exceeds the
amount of deductions disallowed in the Dreyer Farms notice of
deficiency. The record does not explain that excess. Moreover,
since the depreciation respondent disallowed as a deduction to
Dreyer Farms was not an expenditure, we assume that adjustments
in the Weeldreyer notice of deficiency did not include the
depreciation.
We have computed the fair rental value of the farmhouse that
was included in respondent’s adjustment to the Weeldreyers’
income as follows:
11/30/95 11/30/96 11/30/97
Dreyer Farms notice of deficiency
Disallowed food & lodging deductions $12,265 $15,667 $16,301
Less depreciation on residence 2,357 3,219 3,326
Food & lodging expenditures 9,908 12,448 12,975
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