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of the property was $82,105.26 per year ($78,000 � .95).
Respondent allowed ATV to deduct only $52,260 of ATV’s $78,000
Landmark Hall rent expense (.67 x 78,000), thereby disallowing
$25,740 of the rent expense. In so doing, respondent failed to
account for the 5 percent of Landmark Hall allocated to Mr.
Cutts’s personal use under the terms of the lease.
If we had upheld respondent’s determination of 33 percent
personal use by Mr. Cutts, ATV would have been entitled to a rent
deduction of $55,010.52 ($82,105.26 x .67) and the disallowed
rent deduction would have been $22,989.48 ($78,000 - $55,010.52).
We direct the parties to account for the 5 percent of
Landmark Hall not leased and used by ATV, which has a rental
value of $4,105.26 ($82,105.26 - $78,000) under the terms of the
lease, in the Rule 155 computation in accordance with our holding
on Issue 1 in this case, as discussed below.
Petitioners argue Mr. Cutts should be allocated 7.2 percent
of Landmark Hall for personal use of four rooms on the third
floor, including Justin’s personal bedroom, the den, his own
bedroom, and one bathroom, that, according to Mr. Cutts’s
measurements, occupy 860 square feet out of 11,900 square feet
for the main house and carriage house. Respondent argues Mr.
Cutts should be allocated a minimum of 33 percent of Landmark
Hall for his overall personal use of the whole third floor and
the kitchen. Respondent does not include the carriage house as
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