- 15 -
property held for productive use in a trade or business or for
investment.6 However, the nonrecognition treatment of section
1031(a) does not apply to any exchange of "property held
primarily for sale". Sec. 1031(a)(2)(A). The test of whether
property is held primarily for sale or for investment is applied
at the time of the exchange. See Cottle v. Commissioner, 89 T.C.
467, 487 (1987). Petitioner bears the burden of proving that it
had the requisite investment intent. Click v. Commissioner, 78
T.C. 225, 231 (1982).
Respondent argues that the transaction fails to qualify
under section 1031 because petitioner held the Exchange Property
primarily for sale.7 Petitioner argues that it held the Exchange
Property for investment. Consequently, our focus is solely upon
the characterization of the Exchange Property.
For purposes of section 1031, neither the Code nor the
regulations define "held for investment." The regulations
provide that "[u]nproductive real estate held by one other than a
6 Sec. 1031(a)(1) provides:
In General--No gain or loss shall be recognized on the
exchange of property held for productive use in a trade or
business or for investment if such property is exchanged
solely for property of like kind which is to be held either
for productive use in a trade or business or for investment.
7 Respondent has not challenged the applicability of sec.
1031 on any other ground.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011