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Partnership Letter of Credit
Although the parties stipulated that the lease agreement set
forth as Schedule E a schedule that allocates the rental payments
for the entire lease term, specifying the amounts and due dates
of such payments, respondent nonetheless argues that if the Court
were to hold that the 11.5-month period of zero rent is a reason-
able rent holiday described in section 467(b)(5)(C), Partnership
would be required for 1988 to accrue rent under section
467(b)(1)(A) in an amount at least equal to the amount of the
Partnership letter of credit (viz, $8,872,245) that BCE delivered
to Partnership. Because we have some difficulty in understanding
respondent's argument, we shall quote it in pertinent part:
respondent asserts that the lease allocates at least
$8,872,245.00 to the first 11.5 months of the lease by
providing for a letter of credit. The letter of credit
was delivered by the lessee, BCE, to the petitioner,
dated June 15, 1988, in the amount of $8,872,245.00.
(Stip. � 26, Jt. Ex. 7-G), and the lease agreement
itself [sic]. (Jt. Ex. 9-I).
Pursuant to the specific provisions of the lease
agreement * * * the lessee is specifically required to
deliver a letter of credit to secure payment of the
basic rent under the lease in the event the lessee de-
faults on its lease payments. Furthermore, the time
period covered by this letter of credit is from June
15, 1988, the date the lessee delivered the letter of
credit to the petitioner * * * until June 30, 1989.
* * *. Not coincidentally, the time period covered by
the letter of credit equates to the 11.5-month rent
holiday claimed by the petitioner.
Clearly, by its very terms, the existence of the
letter of credit indicates that rent is not forgiven in
the first year of the lease in the event the lessee
defaults. Under the lease, the letter of credit se-
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