- 152 -
As shown above, on a retail basis, the aggregate fair
market value of the subject properties exceeds the
aggregate amount of the debt. Accordingly, on the basis
of the record of these cases, we find that the debt
incurred by each partnership in purchasing the subject
properties is bona fide indebtedness.
Points Amortization
Both partnerships paid loan origination fees to EMI
equal to 4 percent of the principal amounts of the first
mortgage loans. This amounted to $148,246 in the case of
EA 83-XII and $138,138 in the case of EA 84-III. These
fees were nonrefundable and were similar in amount to
origination fees charged by other lenders. As discussed
above, they were paid in connection with bona fide
indebtedness. Accordingly, we agree with petitioners that
these fees are deductible ratably over the life of the
first mortgage loans. See Von Muff v. Commissioner, T.C.
Memo. 1983-514.
Profit Motive
Respondent determined in the subject notices of
FPAA that the activity conducted by each partnership, EA
83-XII and EA 84-III, during each of the years in issue,
was an "activity not engaged in for profit" within the
Page: Previous 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 NextLast modified: May 25, 2011