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it is, in our view, an asset which is subject to amortization.
Permitting amortization deductions on the basis of this
intangible asset does not run afoul of the interest deduction
rules of section 163 or the OID rules. We cannot agree with
respondent that petitioner’s claimed amortization deductions are
in effect a substitute for interest.
In support of his argument that petitioner is attempting to
circumvent the rules for deducting interest and OID, respondent
directs our attention to section 197 where Congress specifically
expressed its intent that below-market financing be addressed
under present law. Section 197, which was enacted after the
years in issue and does not apply to the years before us,
provides rules for the amortization of certain “amortizable
section 197 intangibles”.15 Under section 197(e)(5)(B), the term
“section 197 intangible” does not include any interest under any
15Sec. 197 is generally effective with respect to property
acquired after Aug. 10, 1993. Omnibus Budget Reconciliation Act
of 1993, Pub. L. 103-66, sec. 13261(g), 107 Stat. 540. Sec. 197,
by reason of its effective date, does not apply to the instant
cases. Under sec. 197(a), a taxpayer is entitled to an
amortization deduction with respect to “any amortizable section
197 intangible.” The deduction under sec. 197 is determined by
amortizing the adjusted basis (for purposes of determining gain)
of the intangible ratably over a 15-year period beginning with
the month in which the intangible was acquired. Sec. 197(a). An
“amortizable section 197 intangible” is any “section 197
intangible” acquired by a taxpayer after Aug. 10, 1993, and held
in connection with the conduct of a trade or business or an
activity described in sec. 212. Sec. 197(c)(1); Frontier
Chevrolet Co. v. Commissioner, 116 T.C. 289, 292 (2001), affd.
329 F.3d 1131 (9th Cir. 2003).
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