- 20 - acquisition of a capital asset. When section 167(c)(2) was enacted, with the exception of some precedent in the Sixth Circuit, the courts did not permit the approach sought by petitioner here--allocating part of the cost of acquiring a leased asset to a deductible expense (attributable to the termination of a burdensome lease). Generally, the courts have held16 that in the acquisition of a leased asset, the portion of the cost attributable to an existing lease is to be associated with or attributable to the value of the asset. The value of the asset without considering the lease has not been considered the true measure of the asset’s value. To value the asset without considering the lease would be to ignore a stream of income (rent) to which the owner of the asset is entitled. A seller of an asset would not separate the lease from the leased asset and ignore what may be the asset’s principal source of value. At some point in the life of a leased asset, the income (rent) to be derived may exceed the residual value of the asset. That is why the vessel here (about halfway through the term of a 20-year lease) may have a value (without considering the lease) of about $14 million, whereas the income 16 The opinions in which this question was considered date back more than 40 years and preceded the enactment of sec. 167(c)(2) by more than 30 years.Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Next
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