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the end result is the same as a reciprocal exchange of
properties. Bell Lines, Inc. v. United States, 480 F.2d 710, 714
(4th Cir. 1973); Carlton v. United States, 385 F.2d 238, 241 (5th
Cir. 1967). Thus, our inquiry here focuses on whether
petitioner's disposition of Sunshine Liquor was a sale, as argued
by respondent, or an exchange, as argued by petitioner.
In Bezdjian v. Commissioner, 845 F.2d 217 (9th Cir. 1988),
affg. T.C. Memo 1987-140, the taxpayers received an oil company's
offer to sell a gas station that the taxpayers operated under a
lease. The oil company refused to accept a rental property owned
by the taxpayers in exchange and, instead, insisted on a cash
transaction. The taxpayers consented and bought the gas station
with the proceeds of a loan that was secured by a deed of trust
on their residence and the rental property. About 3 weeks after
the gas station was conveyed to the taxpayers, they sold the
rental property to a third party who assumed a mortgage and paid
the remainder of the price in cash. The taxpayers treated these
transactions as a like-kind exchange governed by section 1031 on
their 1978 tax return.
The U.S. Court of Appeals for the Ninth Circuit explained
that there was no "exchange" under the meaning of section 1031.
The court found that the taxpayers failed to understand that the
parties involved must make an exchange of property or an interest
in property for other property of a like kind in order for the
transaction to qualify for nonrecognition. The court also found
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