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The amounts owed by Mr. Cutts to ATV represent personal
items purchased by Mr. Cutts with ATV’s credit card and child
support payments made on his behalf by ATV. The amounts owed by
ATV to Mr. Cutts represent ATV’s monthly Landmark Hall rental
obligations, reduced by Landmark Hall mortgage payments made on
Mr. Cutts’s behalf by ATV. The total amount due Mr. Cutts from
ATV increased by $3,611 each month, apparently representing the
excess of ATV’s rental obligations over the required payments on
the Landmark Hall mortgage; the total amount due ATV from Mr.
Cutts increased and decreased by different amounts each month.
As of September 30, 1997, there are entries in the ledgers
showing $199,089.05 of the amount due Mr. Cutts from ATV as
credited against the amount due ATV from Mr. Cutts. For the
entire period October 1, 1996 - December 31, 1997--the 1997 tax
year--there are no entries in the ledgers making any other credit
transfers between the two accounts.
Discussion
Issue 1. ATV’s Right to Landmark Hall Expense Deductions and Mr.
Cutts’s Exposure to Constructive Dividends From ATV
Petitioners argue that even if Mr. Cutts were allocated more
than 5 percent personal use of Landmark Hall, Mr. Cutts would not
have rent or dividend income to the extent the $78,000 annual
rent paid by ATV for the use of 95 percent of Landmark Hall was
less than fair market rent. There is no evidence in the record
of what the fair market value or fair market rent of Landmark
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Last modified: May 25, 2011