- 16 - have to look outside the statutory language. It appears that section 167(c)(2) would be triggered irrespective of whether the lease had a remaining term of 1 day or 10 years. With that premise, it is difficult to accept petitioner’s argument that its own circumstances should be exempted from the statutory requirements. If we accept petitioner’s interpretation that the lease must continue, a taxpayer would be able to avoid the intended effect of section 167(c)(2) merely by a simultaneous acquisition of tangible property, cancellation of the “existing lease”, and the renegotiation of a new lease. Under petitioner’s interpretation, section 167(c)(2) would be rendered impotent and meaningless. Whether we accept the fact that petitioner’s lease terminated upon, 6 months after, or sometime more distant from the acquisition of the vessel, the lease did not terminate until petitioner acquired the vessel. Accordingly, petitioner acquired the vessel at a time when it was subject to the lease.11 11 Respondent points out that in Kloppenberg & Co. v. Commissioner, T.C. Memo. 1986-325, where the taxpayer was similarly attempting to value a capital asset without considering the value of the lease, this Court used the phrase “subject to [a] lease” in the same manner in which respondent advocates that it be used here. In disagreeing with the taxpayer’s approach in Kloppenberg, we stated: No one disputes that after May 3, 1978, * * * [the taxpayer] owned the * * * property in fee simple. However, * * * [the taxpayer’s] argument that the lease should therefore be disregarded ignores the fact that * * * [the taxpayer] owned a significant interest in the * * * property prior to the challenged transaction. It is not the value of the combined interest which (continued...)Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011