- 7 -
law maxim that the substance of a transaction controls
over form. In a sense, the substance of a transaction
in which the taxpayer sells property and immediately
reinvests the proceeds in like-kind property is not
much different from the substance of a transaction in
which two parcels are exchanged without cash. Bell
Lines, Inc. v. United States, 480 F.2d 710, 711 (4th
Cir. 1973). Yet, if the exchange requirement is to
have any significance at all, the perhaps formalistic
difference between the two types of transactions must,
at least on occasion, engender different results.
Accord, Starker v. United States, 602 F.2d, 1341, 1352
(9th Cir. 1979).
Courts have afforded some latitude in structuring exchange
transactions. See, e.g., Magneson v. Commissioner, supra (change
in mechanism of ownership which does not significantly affect
amount of control or nature of underlying investment does not
preclude a tax-free exchange); Starker v. United States, supra at
1354-1355 (the transfers need not occur simultaneously);4
Alderson v. Commissioner, 317 F.2d 790, 793 (9th Cir. 1963),
revg. 38 T.C. 215 (1962) (parties can amend previously executed
sales agreement to provide for an exchange); Barker v.
Commissioner, supra at 562 (a party can hold transitory ownership
solely for the purpose of effectuating an exchange); Biggs v.
Commissioner, 69 T.C. 905, 913-914 (1978); affd. 632 F.2d 1171
(5th Cir. 1980) (multiple parties can be involved in an exchange
with parties not owning any property at the time of entering into
4 In 1984, sec. 1031 was amended by the enactment of sec.
1031(a)(3) to permit nonsimultaneous exchanges under certain
limited circumstances. This provision is more restrictive in
that regard than the decision in Starker v. United States, 602
F.2d 1341, 1352 (9th Cir. 1979).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011