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continued to be located at Harlan’s residence. However, after
the transfer of the residence to Harwood Group, Floors Trust paid
Harwood Group $500 per month as rent for the use of the garage
and a bedroom located in the residence. The rent was originally
set at $800 per month, but at some time not disclosed in the
record, it was reduced to $500 per month because Harlan concluded
that Harwood Group did not require that much income. When Harlan
was operating Edwards Vinyl as a sole proprietorship, the
business did not pay rent for the use of the same space in the
residence.
Bartering Income
During 1998, Harlan was a member of two bartering clubs,
American Barter Corp. and Tradeworld. In that year, Harlan
received services from bartering valued at $5,359 and $11,375
from American Barter Corp. and Tradeworld, respectively.
Returns
Floors Trust filed a Form 1041, U.S. Income Tax Return for
Estates and Trusts, for the taxable year 1998. Harlan did not
file a Form 1040, U.S. Individual Income Tax Return, for the 1998
taxable year.
OPINION
I. Evidentiary Note
The record in this case is sparse. Petitioners attached
several exhibits to their brief and made numerous factual
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