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and Davidson County due to condemnation proceedings. The
provision in the aforementioned agreement reads as follows:
13.01 Replacement Property. Buyer, [ISC and ESI]
represent[s] and warrant[s] to Sellers that one or more
of said entities plan to purchase real property to
relocate the business of [ISC and ESI] once possession
of said property is lost to the Metropolitan Government
of Nashville and Davidson County, Tennessee due to
condemnation proceedings. Buyer, [ISC and ESI]
acknowledges that Sellers are relying upon the purchase
of said replacement property in order to secure the
[$350,000] Promissory Note constituting part of the
deferred payment to Sellers.
On May 31, 1994, ESI and the Metropolitan Development and
Housing Authority (Housing Authority) entered into a contract of
sale of real estate for the properties located at 213-215 5th
Avenue South and 301-307 5th Avenue South for $775,000. Also on
May 31, 1994, ISC and the Housing Authority entered into a
similar contract for the sale of properties located at 305 5th
Avenue South and 302 6th Avenue South for $550,000.
ESI and ISC each made elections on their 1994 U.S.
Corporation Income Tax Return, Form 1120, not to recognize gain
realized from the compulsory or involuntary conversion of
property under section 1033(a)(2). On its 1994 return, ESI
elected not to recognize $701,161 in realized gain resulting from
a June 20, 1994, condemnation of its building and land. On its
1994 return, ISC also elected not to recognize $465,250 in
realized gain resulting from a June 20, 1994, condemnation of its
building and land. In doing so, both corporations stated that
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Last modified: May 25, 2011