- 25 -
deductions are in addition to those for rent required
to be paid under the lease. See Washington Package
Store, Inc. v. Commissioner, T.C. Memo. 1964-294.[13]
[Id.14]
We see no principled difference in the tax treatment under
section 167(a) of favorable financing and a favorable leasehold.
We have no problem equating a right to use money at a below-
market interest rate with a right to use property at a below-
market rental rate. Indeed, in Dickman v. Commissioner, 465 U.S.
at 337, the U.S. Supreme Court similarly equated such rights in a
case involving interest-free demand loans, stating:
The right to the use of $100,000 without charge is
a valuable interest in the money lent, as much so as
the rent-free use of property consisting of land and
buildings. In either case, there is a measurable
economic value associated with the use of the property
transferred. The value of the use of money is found in
what it can produce; the measure of that value is
interest--“rent” for the use of the funds. We can
assume that an interest-free loan for a fixed period,
especially for a prolonged period, may have greater
value than such a loan made payable on demand, but it
would defy common human experience to say that an
intrafamily loan payable on demand is not subject to
accommodation; its value may be reduced by virtue of
its demand status, but that value is surely not
eliminated.
13Sec. 1.162-11(a), Income Tax Regs., provides: “If a
leasehold is acquired for business purposes for a specified sum,
the purchaser may take as a deduction in his return an aliquot
part of such sum each year, based on the number of years the
lease has to run.”
14Indeed, in New Orleans La. Saints v. Commissioner, T.C.
Memo. 1997-246, the Commissioner stipulated that the favorable
leasehold interest in that case was an intangible asset with a
limited useful life equal to the term established in the lease.
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011