- 7 -
cases cited above. Whereas petitioners state on brief that here,
unlike there, “it is crystal clear that the rental activity was
not contrived as a tax shelter”, they have directed us to no
evidence in support of that statement. Nor have they directed us
to any evidence to support their related statement on brief that
the rental of the office served a bona fide business purpose in
that “It was reasonable that Cal Interiors and [S&C] Dent should
pay a fair rental for the [office] space”, given that the
Beecher’s [sic] spent their personal funds to construct office
space”. Contrary to petitioners’ belief, the taxpayers in those
other cases also presumably used their personal funds to purchase
the property that was the subject of the rentals there.
Moreover, from a legal point of view, we read nothing in the
statute or in the legislative history thereunder that would
require the Secretary to condition the recharacterization rule on
the absence of a bona fide purpose for a “self-rental” such as we
have here. In fact, we and the Courts of Appeals that have
considered the validity of the recharacterization rule have read
the statute and the underlying legislative history to support a
contrary conclusion that the Secretary was authorized by Congress
to apply the recharacterization rule to all self-rentals in which
there is material participation by the taxpayer. As we stated in
Krukowski v. Commissioner, supra at 369-370:
The [recharacterization] rule is tied directly to the
following passage set forth by the conferees in their
Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011