107 T.C. No. 7
UNITED STATES TAX COURT
REPUBLIC PLAZA PROPERTIES PARTNERSHIP, PFI REPUBLIC
LIMITED, INC., TAX MATTERS PARTNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23300-94. Filed September 16, 1996.
Company A (A) sold Company B (B) a 35-percent
interest, and retained a 65-percent interest, in a
commercial office building (building) that was subject
to an existing loan (loan) made by Company C (Lender).
A and B contributed their respective interests in the
building to Partnership P (P) that was formed by A and
B pursuant to a partnership agreement (partnership
agreement), and P assumed the loan. Pursuant to a
lease, P leased A the building, which was approximately
29 percent vacant, for a term of 24 years and 11.5
months. Except for a small amount of space, A was not
to occupy the building, but instead was to sublease it.
The lease required A to pay P rent in the amounts and
on the dates specified in a schedule contained in the
lease (rent payment schedule) that took into account,
inter alia, the requirements of Lender with respect to
servicing the loan. The lease and the rent payment
schedule allocated the rental payments for the entire
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