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Bareboat Charter. Any payment made by petitioner would have
resulted in a wash under the various agreements. The UMTC
partnership and the sublease arrangements remained in effect, and
the marketing and third-party leases continued to operate
normally under the agreement until sometime in 1994.
Solely for purposes of his motion, respondent also accepts
the fact that the lease was burdensome and that, at the time
petitioner acquired it, the value of the vessel was $13,865,000,
without considering the value of the lease8. Under this
scenario, petitioner is seeking to allocate $93,883,295, or 87
percent, of the $107,748,295 purchase price to the termination of
the burdensome lease, leaving $13,865,000 attributable to its
basis in the vessel.
Petitioner questions respondent’s assumption in his motion
that the lease remained in existence and was not terminated until
June 30, 1994. Petitioner argues that the lease was effectively
terminated in December 1993 after the vessel was purchased, and
the June 30, 1994, termination was merely a formality.
Petitioner contends, however, that respondent’s position that
section 167(c)(2) applies would fail under either scenario.
8 Respondent’s concessions cause sec. 167(c)(2) to be the
focal point of this opinion and our consideration.
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