10
2-7-92 7,651.21 Cash balance to corporation
In these cases, we are met again with the tension between
section 1001(c), which broadly provides on the one hand that in
the case of a sale, the amount of gain or loss shall be
recognized, and, on the other hand, the requirement of section
1031(a), which allows for the nonrecognition of gain or loss
where like-kind properties are exchanged to be used in a
productive trade or business or for investment. 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.
As this Court said in Barker v. Commissioner, 74 T.C. 555, 561
(1980):
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. 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).
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
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