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capital expenditures “‘are those of degree and not of kind’”,
INDOPCO, Inc. v. Commissioner, supra at 86 (quoting Welch v.
Helvering, supra at 114), with each individual case “‘[turning]
on its special facts.’” Id. (quoting Deputy v. du Pont, supra at
496). In the instant case, the material facts on which we must
determine whether the expenditures at issue should be capitalized
are not in dispute. Under the 1985 sale and leaseback,13 the
amount of basic rent due from petitioner was dependent upon,
inter alia, the amount of interest payable on the 1984 tax-exempt
bonds.14 The annual interest rate on the 1984 tax-exempt bonds
was 10.5 percent, and the annual amount of interest payable on
such bonds was $11,838,750. Thus, the 1985 sale and leaseback
agreements required petitioner to pay in the aggregate at least
$11,838,750 per year in basic rent to the owner participants.
On or about December 12, 1991, petitioner initiated a
refinancing study regarding the benefits that it would derive in
the event of a modification of the 1985 sale and leaseback which
13We have found that the 1984 lease and sublease, the 1984
bond indenture agreement, the 1984 tax-exempt bonds, and the 1985
sale and leaseback were agreements reflecting an integrated plan
of interrelated and interdependent transactions or steps. Each
of those transactions or steps was necessary in order to effectu-
ate petitioner’s objective of transferring by sale or otherwise
the AVS unit II to one or more transferees and leasing that unit
back from such transferee(s).
14The minimum annual basic rent payable by petitioner was
equal to the principal and interest payable on the 1984 tax-
exempt bonds.
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