Larry L. Beeler and Cynthia J. Beeler - Page 19

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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                               
                  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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