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leaseback or long-term agreement, or
(B) such agreement does not provide for the
allocation referred to in paragraph (1)(A).
(4) DISQUALIFIED LEASEBACK OR LONG-TERM
AGREEMENT.--For purposes of this subsection, the term
"disqualified leaseback or long-term agreement" means
any section 467 rental agreement if--
(A) such agreement is part of a leaseback
transaction or such agreement is for a term in
excess of 75 percent of the statutory recovery
period for the property, and
(B) a principal purpose for providing in-
creasing rents under the agreement is the avoid-
ance of tax imposed by this subtitle.
(5) EXCEPTIONS TO DISQUALIFICATION IN CERTAIN
CASES.--The Secretary shall prescribe regulations
setting forth circumstances under which agreements will
not be treated as disqualified leaseback or long-term
agreements, including circumstances relating to--
(A) changes in amounts paid determined by
reference to price indices,
(B) rents based on a fixed percentage of
lessee receipts or similar amounts,
(C) reasonable rent holidays, or
(D) changes in amounts paid to unrelated 3rd
parties.
The parties disagree over whether the lease agreement is a
disqualified leaseback or long-term agreement described in
section 467(b)(4).12 In advancing their respective positions
12 Respondent's primary position in the FPAA was that for 1988
Partnership was required to accrue rent under the lease agreement
in an amount equal to 6.5 (viz, the number of months remaining in
1988 after the execution of the lease agreement on June 14, 1988)
(continued...)
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