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months and years, the principal balance due on the indebtedness
and the proper accrued interest deduction thereon.
Petitioner emphasizes the following points: (1) That under
the express terms of the Partnership’s promissory note, the
monthly payments of $43,725 were to represent "interest" only;
(2) that the Partnership’s total stated principal indebtedness on
the promissory note of $4,770,000 was to remain outstanding for
the initial 17-year term of the promissory note and was to be
refinanced at the end of 17 years with a new 20-year promissory
note that would then be amortized over the next 20 years with
payments of principal and interest; (3) that the enforceability
under State law of the terms of the initial 17-year promissory
note is not affected by our disregard, solely for Federal income
tax purposes, of a portion of the principal amount of the
Partnership’s indebtedness; and (4) that to apply to principal
the portion of each $43,725 monthly payment that is not accruable
as interest (under the economic accrual method of calculating
interest) would represent an impermissible disregard of the
interest-only feature of the Partnership’s monthly payments
during the initial 17-year term of the promissory note and would
represent an impermissible rewrite by the Court of the
Partnership’s indebtedness to a term of just over 6 years.
The following language from petitioner's memorandum in
support of the instant motion elaborates further on petitioner’s
position --
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Last modified: May 25, 2011