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the appropriate tax treatment of those rights. See United States
v. National Bank of Commerce, 472 U.S. 713, 722 (1985). The
agreements at issue were executed within the State of Nebraska by
residents of Nebraska for the lease of property located in
Nebraska. We thus look to Nebraska law to determine the nature
of the property rights created by the agreements.
Four lease agreements between the PC and the 1203
Partnership were executed from May 1, 1986, to May 1, 1993. Each
of the documents is a complete agreement entitled “Real Estate
Lease” and covers all material terms of the lease. Each of the
agreements provides for a specified rental term of 1 year
beginning on the date the agreement was executed and contains a
provision that the lease is “to be automatically renewed year to
year”.
Many states recognize a distinction between an extension and
a renewal of a lease. See 51C C.J.S., Landlord and Tenant, sec.
54b, at 164 (1968); 49 Am.Jur.2d, Landlord and Tenant, sec. 141
(1995). In such states, an extension creates on its own force an
additional term, and the same lease continues in force during the
additional period. See 51C C.J.S., Landlord and Tenant, sec.
54b, at 164 (1968); 49 Am.Jur.2d, Landlord and Tenant, sec. 141
(1995). In contrast, a renewal requires the execution of a new
lease and is regarded as a separate contract. See 51C C.J.S.,
Landlord and Tenant, sec. 54b, at 164 (1968); 49 Am.Jur.2d,
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