Republic Plaza Properties Partnership, PFI Republic Limited, Inc., Tax Matters Partner - Page 20

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          However, respondent contends that the 11.5-month period of zero             
          rent does not qualify as a reasonable rent holiday described in             
          section 467(b)(5)(C).14                                                     

          13(...continued)                                                            
             fully occupied.  The problem with petitioner's arguments is              
             that they attempt to prove a non-tax avoidance motive for                
             periods and events that occur after the first 11.5 months                
             of the lease.  Petitioner must justify the fact that the                 
             nonpayment of rent during the first 11.5 months of the                   
             lease did not have tax avoidance as its primary motive.                  
             What happens in year 12 and petitioner's expectations for                
             increases in cash flows from future subleases when the                   
             building is occupied have nothing to do with the forgive-                
             ness of rent during the first 11.5 months of the lease.  At              
             least, petitioner has not established this relationship.                 
             The key point here is the reasons given by petitioner do                 
             not establish a business purpose or tax-independent motive               
             for the nonpayment of rent during the critical time period               
             in dispute.  In essence, petitioner's explanation of future              
             events is just not focused on the period of time and the                 
             issue before the Court.                                                  
          14  Respondent also makes various assertions in her answering               
          brief about "several major distortions or unexplained spikes [on            
          February 1 of each of the 22-annual lease periods following the             
          11.5-month period of zero rent] in the rental payments over the             
          long term of the lease" that she alleges are provided in the                
          rental payment schedule and argues from those assertions that               
             Schedule E cannot be said to relate to the terms of the                  
             lease agreement because of the unexplained distortions                   
             described above.  This is because the lease (Jt. Ex. 9-I,                
             pp. 17-18, � 4.1) basically provides that annual rent is                 
             equal to the lower of fair market rental or 90% of the                   
             average basic rent.  This latter description of rent under               
             the lease agreement in no way covers, explains, or relates               
             to the several up-and-down increases in rental payment over              
             the term of the lease.  Therefore, since each of the rental              
             payments was not allocated according to the actual terms of              
             the lease agreement, the rent leveling and present value                 
             principles of I.R.C. � 467(b)(2) and � 467(e) apply.                     
          Although it is not altogether clear what respondent intends to              
                                                             (continued...)           




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