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Petitioners are highly successful, effective, and
sophisticated real estate investors. They knew that they had not
timely identified Pleasant Hill or Skyland as replacement
property and that the transaction did not qualify as a section
1031 exchange. Petitioners reported the transaction as a section
1031 exchange and knowingly and deceptively deferred tax on over
$3.5 million in taxable gain. Petitioners willfully took steps
to disguise the taxable sale as a section 1031 exchange.
Petitioner husband knowingly solicited fabricated letters from
Mr. Fivey and Ms. Love. He also knowingly intended to commit
fraud when he backdated a letter to Mr. Clack in which petitioner
husband purported to identify Pleasant Hill and Skyland. It is
likely that petitioner husband intended this letter to replace
the Van Voorhis letter which identified 10 replacement
properties, not including either Pleasant Hill or Skyland.
Petitioners were involved in the preparation of these false
documents and presented them to their accountant and to the IRS
as part of their tax returns and in support of their reporting
during the audit.
Petitioners argue the false documents were not fraudulent
because written identification was not required under section
1031(a)(3)(A) and the regulations thereunder during the years in
issue. This case involved more than fabricated written
identification. We have found that petitioners did not show any
interest in the Pleasant Hill property or the Skyland property
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