dissenting:

In Peck I, the tax court held that the transfer served a legitimate business purpose, and it concluded that the Commissioner could not “disallow” the deduction because section 482 authorized him only to “distribute, apportion, or allocate” certain items. Peck v. Commissioner, 43 T.C.M. (CCH) 291, 295 (1982).

The court went on to hold in favor of the Commissioner on the contention that the rent deduction should be reduced by the amount of those additional payments for expenses directly attributable to the land transferred to the corporation (as distinguished from payments attributable to the improvements retained by the taxpayers). Id. The holding in footnote 8 of Peck I is as follows:

Id. at 296 .

I dissent from the majority holding that the formula in footnote 8 binds the taxpay *531 ers for the years 1977 and 1978. I agree with the majority’s holding that the taxpayers are barred by collateral estoppel from the contention that the lease as written is reasonable. However, once that is decided, the Commissioner is required to exercise his discretion under section 482. The taxpayers should be allowed to contest the exercise of that discretion rather than be bound by a formula announced in Peck I which is now being applied prospectively.

The lease calls for an adjustment of the rent after five years based upon the Consumer Price Index. The lease as written is, as far as we know, enforceable under local law. If the taxpayers are bound for the years 1977 and 1978 by a formula allocation, then I fear they will be bound by the same formula for the entire remaining life of the lease. By applying collateral estop-pel to the narrow question of the Commissioner’s power under section 482, the majority may have rewritten the terms of the lease. If the deduction claimed by the taxpayers needs to be reallocated to avoid the ills that section 482 was designed to prevent, it should be done only on a year by year basis.