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On its 1997 return, ATV deducted $78,000 for rent paid for
the use of Landmark Hall at the rate of $6,500 per month and
claimed expenses of $11,919.19 for all utility expenses and
$6,095 for repairs to the pool.
On Schedule E, Supplemental Income and Loss, of his 1997
return, Mr. Cutts reported $78,000 in rental income from Landmark
Hall and claimed Landmark Hall deductions totaling $18,100 for
the following items: $6,131 mortgage interest, $3,137 real
estate taxes, $6,668 depreciation allowance, and $2,164
insurance. Respondent determined ATV’s business use of Landmark
Hall as 67 percent and Mr. Cutts’s personal use as 33 percent.
In so doing, respondent determined ATV could deduct $52,260 of
the $78,000 rent expense on Landmark Hall (.67 x 78,000), thereby
disallowing $25,740 of the rent expense ATV claimed as a
deduction.
Swimming Pool
All ATV employees working at Landmark Hall were aware they
could use the pool for 1 hour each day as a fringe benefit.
Cheryl Harrington (Ms. Harrington), secretary of ATV, who has
been employed by ATV since 1984, used the pool several times a
week during the summer of 1997. Justin used the pool during his
summer visits. In 1997, ATV claimed a deduction of $6,095 for
the cost of repairing leaks in the pool.
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Last modified: May 25, 2011