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applicable versions of the Internal Revenue Code. Rule
references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Many facts were stipulated. We incorporate herein by this
reference the parties’ stipulation of facts and the exhibits
submitted therewith. We find the stipulated facts accordingly.
The Beechers are husband and wife, and they resided in Woodside,
California, when their petition was filed with the Court. The
principal place of business of the other two petitioners (i.e.,
the corporations) also was in Woodside, California, when their
petitions were filed.
Cal Interiors, Inc., is a C corporation wholly owned by
Gary Beecher. Its business is the repair of automobile
interiors. S & C Dent Corp. is a C corporation wholly owned by
Dolores Beecher. Its business is the removal of dents from
automobiles. Both of the Beechers work full time in the
businesses of the corporations, and each corporation’s business
office (office) is located in the Beechers’ home. The
corporations pay rent to the Beechers for use of the space in
which the office is located.
On their 1997, 1998, and 1999 Federal income tax returns,
the Beechers reported the income and expenses of six rental
properties. For the respective years, the net income of one of
these properties; i.e., the office, was reported as $39,307,
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