- 23 -
the sublease clause did not constitute a percentage of the profit
derived from the Budweiser-sponsored event. Obviously, it did.
The Museum principally argues that we should recognize a de
minimis exception to the above-quoted language. We refuse to do
so. The statute explicitly contemplates that, as is the case
here, proscribed rental payments may constitute only a portion of
the total rents received. It is axiomatic that an unambiguous
statute should be given effect according to its plain and obvious
meaning. See Chevron U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 842-843 (1984); Bate Refrigerating
Co. v. Sulzberger, 157 U.S. 1, 36-37 (1895); Halpern v.
Commissioner, 96 T.C. 895 (1991). Here, a portion of the rent
paid in 1988 was determined based upon the profits that MCA
derived from the Budweiser-sponsored event. Accordingly, none of
the rent paid by MCA in 1988 qualifies under section
512(b)(3)(A)(i) as rent from real property, and it is therefore
subject to UBIT.6
6While the result may seem inequitable, the Museum had been
put on notice that the sublease provision of the Second Lease
potentially subjected the total lease proceeds to UBIT. The
opinion letter from Baer Marks & Upham points out that the
sublease revenue provision could possibly taint all the proceeds
from the lease. The letter recommends that the Museum recast the
provision from the First Lease. In response, the Museum changed
the term "Net Sublease Revenues" to "Sublease Revenues". Aside
from deleting the word "Net", no changes were made to the
substantive portions of the sublease revenue provision in the
Second Lease.
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011