May v. Commissioner
United States Court of Appeals for the Ninth Circuit
723 F.2d 1434 (1984)
Dr. Lewis May (plaintiff) and his wife deeded their entire interest in his medical office to an irrevocable trust for their children's benefit, then leased the property back from the trust at a fair rent and continued using it as his medical office, deducting the lease payments as an ordinary and necessary business expense. The Commissioner of Internal Revenue (defendant) issued a deficiency notice challenging the deduction, but the tax court sided with May under section 162(a) of the tax code, and the Commissioner appealed.
Whether a federal taxpayer may deduct gift-leaseback expenses as business expenses only if his gift conveyed a sufficient property interest to the donee.