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At trial and on brief, petitioners cite Starker v. United
States, 602 F.2d 1341 (9th Cir. 1979), as their underlying
authority for section 1031 exchange treatment. Their reliance is
misplaced. In Starker, the taxpayer transferred timberland to a
corporation which, within a previously agreed period, transferred
to the taxpayer various parcels of land and certain contract
rights. In Starker, unlike the instant case, no cash was ever
transferred. Starker held, in relevant part, that the
nonsimultaneous transfers of property did not preclude section
1031 treatment.1 Starker does not, however, dispense with the
requirement that there in fact be an exchange of property. As
previously discussed, petitioners have failed to cross that
initial threshold.
Accordingly, we sustain respondent’s determination that
petitioners have failed to meet the requirements for a section
1031 exchange.
Interest Expenses and Taxes
On Schedule E of their 1993 joint Federal income tax return,
in computing a claimed loss from rental real estate, petitioners
1 Subsequent to the decision in Starker v. United States,
602 F.2d 1341 (9th Cir. 1979), Congress amended sec. 1031(a) to
impose certain time limitations on the completion of a
nonsimultaneous exchange. See sec. 1031(a)(3), as enacted by the
Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 77(a), 98
Stat. 596. Respondent has not raised, and we do not reach, the
issue of whether petitioners have satisfied those statutory
requirements.
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