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C. Petitioner’s Alternative Position. Although we have
decided that petitioner’s acquisition of the vessel is governed
by section 167(c)(2), the same result would have been reached
even if section 167(c)(2) had not been enacted. Petitioner
argues that we should treat the acquisition as though it were two
separate payments or portions. Petitioner contends that one
portion would be attributable to the acquisition of a vessel
worth substantially less than the $108 million total payment and
the other should be attributable to the cancellation of a
burdensome lease. Respondent points out that petitioner chose
the approach to acquire the vessel instead of making the payment
to terminate the burdensome lease. We note that petitioner’s
cost to acquire the vessel was approximately 20 percent less than
the cost of the option permitting termination of the lease.
Petitioner, therefore, wishes us to treat the acquisition of the
vessel as though it had, in effect, exercised both choices--
petitioner wishes “to have its cake and eat it too!”12
11(...continued)
* * * [the taxpayer] owned after May 3, 1978, which is
in issue. Rather, it is the interest which * * * [the
taxpayer] purchased from * * * [the owner/lessor] on
that date, i.e., a fee simple interest subject to the
outstanding lease. * * * [Id.; with emphasis as
suggested by respondent.]
12 Petitioner obviously followed the less costly approach
from a financial perspective, but not necessarily from a tax
perspective. Petitioner has provided no explanation for the 20
percent larger cost to terminate the lease than to acquire the
(continued...)
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