Republic Plaza Properties Partnership, PFI Republic Limited, Inc., Tax Matters Partner - Page 18

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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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