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income any credit a lessee receives from his lessor for
permanent improvements to the lessor’s property under a
short-term lease. It follows that the income expended
by a lessee for permanent improvements to the lessor’s
property are deductible from the lessee’s gross income.
Section 11015 does not apply in the instant case. Firstly,
section 110 applies only to leases entered into after August 5,
1997. Sec. 1213(e) of the Taxpayer Relief Act of 1997, Pub. L.
105-34, 111 Stat. 788, 1001. The lease in the instant case was
entered into on or about August 21, 1995. Thus, section 110 does
not apply in the instant case.
Secondly, even if the Lease were subject to section 110, it
would not apply in the instant case given the nature of the
parties’ dispute. Section 110 is an income exclusion provision.
Respondent is not charging petitioners with income on account of
any TUP 130 payment or the 6-month rent holiday that TUP 130
15 Sec. 110 provides, in pertinent part, as follows:
SEC. 110. QUALIFIED LESSEE CONSTRUCTION ALLOWANCES FOR
SHORT-TERM LEASES.
(a) In General.–-Gross income of a lessee does not
include any amount received in cash (or treated as a rent
reduction) by a lessee from a lessor–-
(1) under a short-term lease of retail space, and
(2) for the purpose of such lessee’s constructing
or improving qualified long-term real property for use
in such lessee’s trade or business at such retail
space,
but only to the extent that such amount does not exceed the
amount expended by the lessee for such construction or
improvement.
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