- 22 - argument, that even if the Court were to hold that the 11.5-month period of zero rent provided in the lease agreement is a reason- able rent holiday described in section 467(b)(5)(C) and/or was not granted for a principal purpose of tax avoidance so that Partnership shall accrue rent for 1988 under the lease agreement by allocating that rent in accordance with that agreement as provided in section 467(b)(1)(A), and not pursuant to the con- stant rental accrual method as provided in section 467(b)(2), Partnership nonetheless would be required for 1988 to accrue rent under section 467(b)(1)(A) in an amount at least equal to the amount of the Partnership letter of credit (viz, $8,872,245) that BCE delivered to Partnership. Reasonable Rent Holiday--Section 467(b)(5)(C) The Code does not define what is meant by the term "reason- able rent holidays" in section 467(b)(5)(C).15 However, the 15 Although sec. 467(b)(5) required the Secretary to issue regulations prescribing circumstances relating to, inter alia, reasonable rent holidays under which agreements will not be treated as disqualified leaseback or long-term agreements, no regulations were issued under sec. 467 until June 3, 1996. On that date, respondent issued proposed regulations under sec. 467 that do not apply to (1) rental agreements entered into prior to the date on which regulations under that section are published as final regulations in the Federal Register and (2) disqualified leaseback and long-term agreements entered into prior to June 3, 1996. Sec. 1.467-8, Proposed Income Tax Regs., 61 Fed. Reg. 27850 (June 3, 1996). Those proposed regulations, which are not in any event binding on the Court, Zinniel v. Commissioner, 89 T.C. 357, 369 (1987), do not apply to the lease agreement in- volved here that was entered into in June 1988, and nothing herein is intended to convey, and nothing herein should be (continued...)Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Next
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