- 37 -
We turn now to the dispute between the parties regarding the
period over which the expenditures at issue, which we have held
must be capitalized, should be amortized and deducted. Peti-
tioner argues that, under section 1.167(a)-3, Income Tax Regs.,
it should amortize and deduct the expenditures at issue over the
two-year period 1995 and 1996. In support of that argument,
petitioner points out that 1995 and 1996 are the years during
which petitioner recouped the expenditures at issue.24 Respon-
dent counters that petitioner should amortize and deduct the
expenditures at issue over the term of the modified 1985 sale and
leaseback beginning with taxable year 199525 and ending with
taxable year 2020.
We turn first to petitioner’s argument that the appropriate
23(...continued)
nity to present evidence at trial relating to whether a bona fide
debtor-creditor relationship existed. Consequently, we shall not
address petitioner’s alternative argument regarding an alleged
loan from petitioner to the owner participants.
24Under the modified 1985 sale and leaseback agreements,
petitioner recouped, through reductions in 1995 and 1996 in its
minimum annual basic rent, the entire amount of the expenditures
at issue. See supra note 9.
25Petitioner paid the expenditures at issue in 1992, 1993,
and 1995. The modified 1985 sale and leaseback agreements became
effective on Oct. 1, 1992. Pursuant to the terms of the modified
1985 sale and leaseback agreements, petitioner did not realize a
substantial reduction in its minimum annual basic rent obligation
until after the redemption of the 1984 tax-exempt bonds and the
issuance of the 1995 tax-exempt bonds on Jan. 1, 1995. Respon-
dent does not argue that, and therefore we shall not consider
whether, the appropriate period over which to amortize and deduct
such expenditures should begin with taxable year 1992.
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011