- 3 - property to an unrelated third party and granted an option to purchase 117 acres of the property for $3,969,000, to expire on August 22, 1989. Petitioners intended to dispose of the property in a section 1031 exchange for like-kind property to obtain nonrecognition treatment of the gain realized. They knew that they had a limited time period after the sale closed to replace the Antioch property with like-kind property and had to identify replacement property within 45 days. Petitioners entered into an agreement with Clack Brothers, Inc. (Clack Bros.), to act as an intermediary to facilitate a like-kind exchange of the Antioch property purportedly in accordance with section 1031 (exchange agreement). Timothy Clack (Mr. Clack), the president of Clack Bros., is a real estate attorney and had represented petitioners in real estate transactions since the 1970's. Pursuant to the exchange agreement, petitioners assigned the right to receive the Antioch option proceeds to Clack Bros. On August 22, 1989, the option holder exercised the option to purchase the Antioch property. Petitioners transferred the title of the Antioch property to the purchaser without Clack Bros.' acquiring legal title. The purchaser paid the $3,969,000 purchase price into an escrow account by August 22, 1989. Clack Bros. thereafter transferred $3,862,339.65 of the proceeds into an interest-bearing trust account in its name and used the remainder for a deposit onPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011