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regarding that dispute, the parties focus on the 11.5-month
period of zero rent provided in the lease agreement.
Petitioner argues that the 11.5-month period of zero rent is
a reasonable rent holiday described in section 467(b)(5)(C) and
that, accordingly, the lease agreement is not to be treated as a
disqualified leaseback or long-term agreement.
Respondent concedes in her opening brief that
If petitioner can establish that the absence of rental
income during this [11.5-month] period [of zero rent]
qualifies as a reasonable rent holiday under the Code,
then the Partnership's deferral of this income will not
be deemed primarily for tax avoidance purposes. In
such a case, the Partnership would be entitled to
report the rental income under the economic accrual
method pursuant to the terms of the lease agreement.13
12(...continued)
times the average monthly rent payment due over the entire lease
term. On brief, respondent abandons that position and relies
solely on her alternative position in the FPAA that Partnership
must accrue rent under the lease agreement according to the
constant rental accrual method prescribed in sec. 467(b)(2)
because the lease agreement constitutes a disqualified leaseback
or long-term agreement as defined in sec. 467(b)(4).
13 We construe the above-quoted concession of respondent to be a
concession by her that increasing rents, if any, under the lease
agreement that are not attributable to the 11.5-month period of
zero rent were not provided for a principal purpose of avoiding
tax under sec. 467(b)(4)(B). Other statements by respondent that
concede this point include the following statement in her answer-
ing brief:
In addition, at pages 16-17 of its opening brief, peti-
tioner attempts to prove the nonexistence of a tax-avoid-
ance motive by emphasizing why the lease was justified in
increasing lease payments in year 12 of the lease, and
petitioner's expected increases in projected cash flows
from future subleases when the building was expected to be
(continued...)
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