Republic Plaza Properties Partnership, PFI Republic Limited, Inc., Tax Matters Partner - Page 32

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          Partnership Letter of Credit                                                
               Although the parties stipulated that the lease agreement set           
          forth as Schedule E a schedule that allocates the rental payments           
          for the entire lease term, specifying the amounts and due dates             
          of such payments, respondent nonetheless argues that if the Court           
          were to hold that the 11.5-month period of zero rent is a reason-           
          able rent holiday described in section 467(b)(5)(C), Partnership            
          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.  Because we have some difficulty in understanding           
          respondent's argument, we shall quote it in pertinent part:                 
               respondent asserts that the lease allocates at least                   
               $8,872,245.00 to the first 11.5 months of the lease by                 
               providing for a letter of credit.  The letter of credit                
               was delivered by the lessee, BCE, to the petitioner,                   
               dated June 15, 1988, in the amount of $8,872,245.00.                   
               (Stip. � 26, Jt. Ex. 7-G), and the lease agreement                     
               itself [sic].  (Jt. Ex. 9-I).                                          
                    Pursuant to the specific provisions of the lease                  
               agreement * * * the lessee is specifically required to                 
               deliver a letter of credit to secure payment of the                    
               basic rent under the lease in the event the lessee de-                 
               faults on its lease payments.  Furthermore, the time                   
               period covered by this letter of credit is from June                   
               15, 1988, the date the lessee delivered the letter of                  
               credit to the petitioner * * * until June 30, 1989.                    
               * * *.  Not coincidentally, the time period covered by                 
               the letter of credit equates to the 11.5-month rent                    
               holiday claimed by the petitioner.                                     
                    Clearly, by its very terms, the existence of the                  
               letter of credit indicates that rent is not forgiven in                
               the first year of the lease in the event the lessee                    
               defaults.  Under the lease, the letter of credit se-                   




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