Republic Plaza Properties Partnership, PFI Republic Limited, Inc., Tax Matters Partner - Page 1

                                   107 T.C. No. 7                                     

                               UNITED STATES TAX COURT                                

                 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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