Donald DeCleene and Doris DeCleene - Page 15

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          1031(a)(1) provides for nonrecognition of gain or loss on the               
          exchange of certain types of like-kind property, including real             
          property, held for productive use in trade or business or for               
          investment.4  Section 1031(b) in effect provides that if the                
          property received in an exchange otherwise qualifying for                   
          nonrecognition of gain under section 1031(a) includes money or              
          other property (“boot”), then any gain to the recipient shall be            
          recognized, but not in excess of the boot.                                  
          Was McDonald Street Sold or Exchanged?                                      
               The question posed by respondent’s determination is whether            
          the subject transactions were a taxable sale to WLC of the                  
          McDonald Street property, as respondent determined, or instead              
          were a taxable sale of the unimproved Lawrence Drive property to            
          WLC, followed 3 months later by petitioner’s transfer of the                
          McDonald Street property to WLC in a like-kind exchange for WLC’s           

          4 Clearly, the Lawrence Drive property, in both its                         
          unimproved and improved states, and the McDonald street property            
          were like-kind properties within the meaning of sec. 1031(a).               
          Sec. 1.1031(a)-1(b), Income Tax Regs., states:                              
                    Definition of “like kind.”  As used in section                    
               1031(a), the words “like kind” have reference to the                   
               nature or character of property and not to its grade or                
               quality.  * * * The fact that any real estate involved                 
               is improved or unimproved is not material, for that                    
               fact relates only to the grade or quality of the                       
               property and not to its kind or class. * * *                           

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