Tax Research Assignment

Based on the facts given and extensive research of the tax code, I am making the following recommendations to the Rattameyers. Firstly, in regards to the $50,000 rent the Rattameyers received from the producers, this should be included in their gross income despite what they were previously told. Based on code sections 109 and 280A, the rent must be included in gross income and is not allowed to be a deduction because of rental use. Even though the producers were only occupying the property for less than 15 days, the amount of money the Rattameyers received as a rental payment can potentially be seen as a bit much considering the value of their home and the duration of time the property was being occupied. Furthermore, the legal doctrine of substance over form can come into play. The economic value of this transaction far outweighs any potential tax break given.

In addition, the value of the Disneyland vacation should be included in gross income. Although, my decision is not based on substantial authority, I strongly believe this is the right thing to do. The Rattameyers and the producers of Surprise Home Makeover entered into a contractual agreement, which listed this vacation as a part of their compensation for being able to use the Rattameyers’ residence. If this vacation was considered compensation, then it should be treated as such on the tax return. It is not an everyday occurrence that people are given multi-thousand dollar vacations in exchange for the use of their home.

Lastly, the value of the improvements/renovations that were made to the Rattameyers’ residence should not be included in gross income. According to code section 109, gross income does not include income (other than rent) derived by a lessor or real property on the termination of a lease, representing the value of such property attributable to buildings