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Respondent points out that Earl Hoover (Hoover),
respondent's expert, testified that the unmined sand was
inventory and not real estate.
Hoover estimated that there were about 1.28 million cubic
yards of unmined sand on the 76.5 acres that was worth $569,460
at the time of the exchange. He also estimated that the air
space to be used as a dump was worth $732,240. His analysis is
unpersuasive because those two amounts total $1,301,700, more
than the arm's-length exchange price of $1.2 million for the
land. Hoover treated the unmined sand as inventory. He gave the
real estate no value. We believe that the land had value.
Catlett, who was not respondent's employee, estimated that the
land was worth $1,163,000. We give Hoover's testimony little
weight.
If property is exchanged as part of the land, it is not
property held primarily for sale. Asjes v. Commissioner, 74 T.C.
1005, 1013-1014 (1980) (unharvested crop exchanged as part of
land not property held primarily for sale for purposes of section
1031); Butler Consol. Coal Co. v. Commissioner, 6 T.C. 183, 188-
189 (1946) (coal in an abandoned coal mine was part of the real
property, not a separate asset). Here, sand was not separated
from and was part of the land when petitioners exchanged it. The
parties to the transaction did not list sand as property
petitioners exchanged. Petitioners received no consideration
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