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The fifth amendment specified that the rental rates for the
periods from January 1, 1993, through December 31, 1998, and from
January 1, 1999, through December 31, 2012, were 5.44 percent and
6.4 percent, respectively. Thereafter, the partnership and the
lessee were to negotiate the rental rate for each 10-year period
beginning on January 1, 2013, through the end of the lease, but
in any event the negotiated rate was not to be less than 6.4
percent or more than 7.7 percent. The fifth amendment also
required the partnership and the lessee to set the fair market
value of the unencumbered land as of the first day of the 10-year
period (adjustment date).
The fifth amendment added additional procedures for
resolving disputes, providing in pertinent part:
If the parties are unable to agree on the * * * Rental
rate to be applicable in the following period prior to
any decennial rent adjustment date from and after
January 1, 2013, the appropriate [p]ercentage (not less
than 6.4% or more than 7.7%) shall be determined by
appraisers appointed to determine such * * * Rental
rate consistent with the procedure for determining the
fair market value of the unimproved land under the
[ground lease].
As of the valuation date, the principal assets of the
partnership were the leased fee interest in the property and a
cash balance of $64,339. In addition, as of that date, the
lessee maintained a 99-room hotel with an occupancy rate of 65
percent.
In connection with the preparation of the estate tax return,
petitioner obtained a valuation of decedent's interest from P.
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