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CHIECHI, Judge: In the notice of final partnership adminis-
trative adjustment (FPAA), respondent determined adjustments to
the Form 1065 (Federal partnership return) that Republic Plaza
Properties Partnership (Partnership) filed for 1988.
The issues remaining for decision are:
(1) Is the 11.5-month period of zero rent at the beginning
of the lease (lease agreement) of an office building by Partner-
ship to BCE Development Properties, Inc. (BCE) a reasonable rent
holiday described in section 467(b)(5)(C)? We hold that it is.
(2) Did the lease agreement provide that the amount of a
letter of credit (viz, $8,872,245), which at the request of BCE
was issued in favor of Partnership, is rent that is allocated to
the first 11.5 months of that agreement so that Partnership is
required for 1988 to accrue as rent the amount of that letter of
credit? We hold that the lease agreement does not so provide and
that Partnership is not required to accrue that amount as rent
for 1988.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
PFI Republic Limited, Inc. (PFI) is the tax matters partner
for Partnership. At the time the petition was filed, Partner-
ship's principal place of business was in Portland, Oregon.
In 1987, Commercial Union Capital Corporation (Commercial
Union), an investment banker employed by BCE, approached PFI
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