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deferral and offset provisions, i.e., to ensure that IRA would
never be liable for the principal amount of the notes, along with
any accrued interest.
In HGA Cinema Trust, the Court specifically rejected the
taxpayers' allegations that the notes were valid because of the
potential effects of FSC's and O.P.M.'s bankruptcies. Some of
the leases herein were modified in connection with the bankruptcy
proceedings, but, as in HGA Cinema Trust, the bankruptcy
modification agreements present in this case have no legal
significance to the validity of the indebtedness, and are
therefore disregarded.
We realize that this Court has rejected the Commissioner's
challenges to the validity of long-term purchase money notes in
some cases involving equipment sales and leasebacks. What is
notable about these cases, however, is not the result, but the
Court's rationale for finding the notes therein to have been bona
fide. For example, in Gefen v. Commissioner, 87 T.C. 1471, 1494
n.15 (1986), we found that the partnership's note was a genuine
debt because the partnership was responsible for the monthly
payments, regardless of whether or not its lessee paid the rent.
In Cooper v. Commissioner, 88 T.C. 84 (1987), the Court, in
upholding the validity of the note, observed that the terms of
the note did not require payment solely out of rental income.
IRA's long-term notes, unlike the notes in Gefen and Cooper,
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