Gary Beecher Delores Beecher v. Commissioner of Internal Revenue

This is an appeal from a decision of the United States Tax Court upholding a tax deficiency determination of the Commissioner of Internal Revenue (“Commissioner”). It is brought pursuant to Internal Revenue Code § 7482. The appellants, Gary Beecher and Dolores Beecher (“Beechers”) challenge the tax court’s ruling that the Beechers cannot apply losses from their various rental properties to offset rental income derived from leases of office space in their home to lessee corporations which they happen to own.

The issues presented are: 1) whether Treasury Regulation § 1.469 — 2(f)(6), as applied to “C” corporations, is arbitrary, capricious, or contrary to Internal Revenue Code § 469 (“Section 469”); 2) whether Congress’s delegation of authority to the Secretary of the Treasury to promulgate regulations pursuant to Section 469 is unconstitutional; and 3) whether the Commissioner must show that a taxpayer was motivated to shelter income as a prerequisite to applying Treasury Regulation § 1.469 — 2(f)(6).

For the reasons set forth hereinafter, we AFFIRM the decision of the tax court.

I. FACTS

A review of the record reveals the following undisputed material facts.

Gary Beecher and…