- 16 -
time the identification was made,5 neither petitioner nor his
adviser was on notice that the Commissioner would take the
position that the number of replacement properties that could be
identified pursuant to the statute generally would be limited to
three. Consequently, a trap for unwary taxpayers was set.6
We also do not accept respondent’s contention that
petitioner’s identification of replacement properties did not
satisfy section 1031(a)(3)(A) because the determination of the
particular replacement property or properties to be received was
not based on contingencies beyond the control of the parties to
the exchange. As noted above, the legislative history relied on
by respondent states: “It is anticipated that the designation
requirement will be satisfied if * * * the particular property to
be transferred will be determined by contingencies beyond the
control of both parties.” H. Conf. Rept. 98-861, supra at 866,
1984-3 C.B. (Vol. 2) at 120. As we stated above, we believe that
Congress was merely illustrating that a contingent identification
5
We note that the proposed regulations setting forth the
Commissioner’s construction of the statute and legislative
history were not published until May 16, 1990, after the
transactions in issue occurred. Sec. 1.1031(a)-3, Proposed
Income Tax Regs., 55 Fed. Reg. 20282.
6
The difficulty taxpayers faced in interpreting the
legislative history has been noted by at least one commentator.
Wasserman, “Mr. Mogul’s Perpetual Search for Tax Deferral:
Techniques and Questions Involving Section 1031 Like-Kind
Exchanges In a World of Changing Tax Alternatives”, 65 Taxes 975,
1000 n.211 (1987).
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