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an agreement to exchange); 124 Front Street, Inc. v.
Commissioner, 65 T.C. 6, 17-18 (1975) (taxpayer can advance money
toward purchase price of property to be exchanged); Coupe v.
Commissioner, 52 T.C. 394, 405, 409 (1969) (the taxpayer can
locate and negotiate for the property to be acquired); J.H. Baird
Publishing Co. v. Commissioner, 39 T.C. 608, 615 (1962) (the
taxpayer can oversee improvements on the land to be acquired);
Mercantile Trust Co. v. Commissioner, 32 B.T.A. 82, 87 (1935)
(alternative sales possibilities are ignored where conditions for
an exchange are manifest and an exchange actually occurs).
Provided the final result is an exchange of property for other
property of a like kind, the transaction may qualify under
section 1031.5
However, courts have discerned boundaries in the
interpretation and application of section 1031. In Barker v.
Commissioner, 74 T.C. at 563-564, we recognized that
at some point the confluence of some sufficient number
of deviations will bring about a taxable result.
Whether the cause be economic and business reality or
poor tax planning, prior cases make clear that
taxpayers who stray too far run the risk of having
their transactions characterized as a sale and
reinvestment.
Other courts have acknowledged that transactions that take
the form of a cash sale and reinvestment cannot, in substance,
constitute an exchange for purposes of section 1031, even though
5 Biggs v. Commissioner, 69 T.C. 905, 914 (1978); affd. 632
F.2d 1171 (5th Cir. 1980).
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