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However, a taxpayer shall not be treated as using a dwelling unit
for personal purposes by reason of a rental arrangement for any
period if for such period such dwelling unit is rented, at a fair
rental, to any person for use as such person’s principal
residence. Sec. 280A(d)(3).
Under section 267(c)(4), “The family of an individual shall
include only his brothers and sisters (whether by the whole or
half blood), spouse, ancestors, and lineal descendants”. Mrs.
Viar’s brother, therefore, was a family member of petitioners
under the plain language of section 267(c)(4). As a result, the
use of that dwelling was personal as to petitioners, and section
280A precludes their deduction of the expenses related thereto.
Moreover, because no evidence was presented as to the fair rental
value of the dwelling or the value of the improvements made by
Mrs. Viar’s brother, petitioners do not fall under the fair
rental exception of section 280A(d)(3). McDonald v.
Commissioner, T.C. Memo. 1991-242; Gilchrist v. Commissioner,
T.C. Memo. 1983-288. Accordingly, petitioners are not entitled
to deduct the depreciation and insurance expenses associated with
the Morningside Heights property under the legal provisions
cited. Respondent is sustained on this issue.6
6 As noted earlier, respondent allowed the claimed
deductions for taxes on the dwelling as an itemized deduction.
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Last modified: May 25, 2011