Dwight Schrute owns an office building that is leased to Dunder Mifflin, Inc., a paper company, for their Scranton, PA location. Michael Scott, regional manager of Dunder Mifflin- Scranton branch, has a brilliant idea to boost morale and productivity in the office. He meets with Dwight to discuss the idea. Michael tells Dwight he wants to remodel the office and build a room that is part caf and part disco, a.k.a. Caf Disco, so that employees can let off steam by dancing and drinking coffee. Michael estimates the remodeling would cost about $20,000 but would really not increase the value of the building because no one really wants a Caf Disco in their office building. Dwight tells Michael he thinks the idea is ridiculous and Michael threatens to go to another office building. Dwight does not want to lose Dunder Mifflin as a lessee so Dwight says he will forgo one months rent of $5,000 if Dunder Mifflin will pay for the Caf Disco remodel. Michael really does not want to move so he agrees to the arrangement. Dwight Schrute engages your CPA Firm and needs your advice and guidance regarding what amount, if any, that he must include in gross income for tax purposes. Write a letter to Mr. Schrute in the required format with your answers by the due date listed in Blackboard. Mr. Schrutes address is 8600 Money Beets Road, Scranton, PA 18503.

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1. RULE OF LAW: Cite your authority in this section. Do not summarize it. Leave any summary for the analysis section. You should find at least one rule of law for each of the three categories listed below:
2. Legislative Authority- The Internal Revenue Code (IRC)
3. Administrative Authority- Regulations, Revenue Rulings