- 29 -
the attorneys involves the requirement that Texas
surrender the possession of all improvements upon
termination of the lease. This seems to be an indica-
tion that the improvements are presently the property
of Texas while the lease agreement is still in effect,
rather than an indication that they are not.
It should be further noted that Section 14, Fire and
Casualty, of the lease agreement between Texas and KQC
states the following:
If and when Lessee shall complete all demolition,
restoration, repair, replacement and rebuilding
which Lessee is required to carry out under this
paragraph, then any balance of insurance proceeds
then held by Lessee shall be retained by Lessee
free of trust.
Where the lessee is able to keep insurance proceeds in
excess of required replacements, there is an indication
that ownership of land and improvements reside with the
lessee during the lease term.
During the period January through March 2000, TMC paid
$1,600 a month rent to KQC (or a total of $4,800), which was the
amount of monthly rent that TMC was required to pay to KQC under
the April 21, 1997 lease. In April 2000, KQC refunded such
monthly rent (or a total of $4,800) to TMC and sent it an invoice
for each of the months January, February, and March 2000 that
showed monthly rent due of $437.50, which TMC paid. Thereafter,
through March 2001, TMC paid rent to KQC of $437.50 a month.
On June 29, 2000, KQC timely filed Form 1065, U.S. Partner-
ship Return of Income, for 1999 (KQC’s 1999 return). George S.
Tutor (Mr. Tutor), who was a tax manager with Ernst & Young in
2000 when KQC’s 1999 return was being prepared, signed that
return as return preparer. Mr. Tutor supervised David Johnston
Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 NextLast modified: May 25, 2011