- 10 -
and Kessler involved maintaining and servicing equipment, AGI
provided extensive services.7
Only one case has previously determined that the services
provided were extraordinary. Welch v. Commissioner, T.C. Memo.
1998-310. Welch involved personal service contracts in which the
taxpayer, a carpenter, contracted with movie production companies
to construct movie sets. The taxpayer also leased tools and
equipment to the production companies. The Court found that the
movie company’s primary motivation was to obtain the taxpayer’s
services and not to lease his equipment. Id. Similarly, we find
that AGI’s attorney-tenants leased from AGI primarily to obtain
its legal support services and not to lease its office space.
The regulations provide examples regarding when the
extraordinary personal services exception might apply. Two
examples concern the use by patients of a hospital’s boarding
facilities and the use by students of a boarding school’s
dormitories.8 See sec. 1.469-1T(e)(3)(v), Temporary Income Tax
Regs., supra at 5702. In each, the use of the premises was
7Further, the Court in Hairston v. Commissioner, T.C. Memo.
2000-386, stated that no credible evidence supported taxpayers’
contention that extraordinary services were performed. The Court
found, rather, that the taxpayers individually had “little or no
responsibility” for maintaining the equipment under the lease,
and that the taxpayers merely “serviced and maintained” equipment
they rented. In contrast, the record supports petitioners’
contention that petitioner wife was continuously engaged in
providing extensive legal support services.
8Additional examples in the regulations address the
extraordinary personal services exception in the context of
leasing photographic equipment, leasing tractor trailers, and
leasing a taxi. See sec. 1.469-1T(e)(3)(viii), Examples (1),
(3), (9), Temporary Income Tax Regs., supra at 5703-5704. We do
not find these examples analogous to our facts.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011