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491. A transaction also will not qualify under section 1031 if the
person with whom the taxpayer made the exchange was acting as the
taxpayer's agent. Coupe, 52 T.C. at 406.
Ms. Ng's transactions did not meet the specific requirements
or the underlying purpose of section 1031. She appropriated the
proceeds from the sale of the Larkin Street and Lombard Street
properties for her own use immediately after the money was
deposited into Strong Hope's bank account, which Ms. Ng treated as
her own. We do not believe she ever intended to pay the $310,000
promissory note she gave as part of the purchase price. Strong
Hope acted as Ms. Ng's agent when it deeded the Stockton Street
property directly to Ms. Ng, contrary to the original agreement of
the parties. Furthermore, Ms. Ng never intended to exchange her
Larkin Street and Lombard Street properties for property of like
kind. She sold those properties because she needed the proceeds to
satisfy her delinquent loans with Wing Lung Bank.
We conclude that Ms. Ng did not satisfy the requirements or
underlying purpose of section 1031 and accordingly hold that she is
liable for gain on the sale of the Larkin Street and Lombard Street
properties.
Issue 4. Strong Hope Liquidation
The next issue we consider relates to the tax consequences of
Strong Hope's transfer of its interest in the Stockton Street
property to Ms. Ng. Respondent determined that Strong Hope made a
liquidating distribution to Ms. Ng when it transferred the Stockton
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