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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
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