- 26 -
real properties. The remaining amounts were lent and borrowed
for construction and renovation activities. Finally, our
interpretation of the third sentence of section 164(a) is
consistent with our holding with respect to ME's loan commitment
fee and attorney's fees, supra, in that costs incurred in
connection with obtaining a loan should be amortized over the
definite term of the loan in lieu of being currently deductible
or depreciable over the useful life of the property acquired with
the loan proceeds. Cf. Anover Realty Corp. v. Commissioner, 33
T.C. 671, 674-675 (1960).
We hold that REE and ME are required to amortize the taxes
in issue over the definite terms of their construction loans.8
Rental Income
The fifth issue for decision is whether REE and TNE are
required to report tenant improvements as rental income.
Under the lease agreements with Blockbuster, REE and TNE
were responsible for purchasing and installing Blockbuster's
standard carpeting. Contrary to the lease agreements, however,
Blockbuster purchased and installed the carpeting at both the
Dunn and Roosevelt properties at costs of $11,020.43 and
$10,023.31, respectively.
8 For reasons akin to our findings with respect to the
amortization period for ME's construction loan commitment fee and
related attorney's fees, we find that REE's construction and
permanent loans constitute separate loans for purposes of
amortization.
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