6
section 1031(b). Accordingly, the controversy is narrowly
framed: was the series of transactions involved herein a
qualifying nontaxable exchange within the limitations of section
1031(a)(3); and, if not, does the integrated transaction qualify
for income tax purposes as an installment sale, to be reported
under the provisions of section 453?
Somewhat prophetically, this Court said in Barker v.
Commissioner, 74 T.C. 555, 560-561 (1980):
This case involves another variant of the
multiple-party, like-kind exchange by which the
taxpayer, as in this case, seeks to terminate one real
estate investment and acquire another real estate
investment without recognizing gain. The statutory
provision for nonrecognition treatment is section 1031.
The touchstone of section 1031, at least in this
context, is the requirement that there be an exchange
of like-kind business or investment properties, as
distinguished from a cash sale of property by the
taxpayer and a reinvestment of the proceeds in other
property.
The "exchange" requirement poses an analytical
problem because it runs headlong into the familiar tax
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. 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.
The line between an exchange on the one hand and a
nonqualifying sale and reinvestment on the other
becomes even less distinct when the person who owns the
property sought by the taxpayer is not the same person
who wants to acquire the taxpayer's property. This
means that multiple parties must be involved in the
transaction. * * * [Fn. ref. and citations omitted.]
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011