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recognized under the general rule of section 1001(c); such a sale
does not become part of a qualifying exchange under section
1031(a) even though the cash received on the sale is immediately
invested in like property. Compare Coastal Terminals, Inc. v.
United States, 320 F. 2d 333, 337 (4th Cir. 1963), with Rogers v.
Commissioner, 44 T.C. 126, 136 (1965), affd. per curiam 377 F.2d
534 (9th Cir. 1967).
Petitioners remind us, and we are well aware--as we stated
in another section 1031 exchange case in which we held against
the taxpayer--that “Notwithstanding the familiar and long-
standing rule that exemptions are to be narrowly or strictly
construed, * * * section 1031 has been given a liberal
interpretation.” Estate of Bowers v. Commissioner, 94 T.C. 582,
590 (1990) (citing Biggs v. Commissioner, 69 T.C. 905, 913-914
(1978), affd. 632 F.2d 1171 (5th Cir. 1980)). The courts have
exhibited a lenient attitude toward taxpayers in like-kind
exchange cases, particularly toward deferred exchanges. See,
e.g., Starker v. United States, 602 F.2d 1341 (9th Cir. 1979).
The Commissioner has also played a facilitating role by issuing
regulations that provide safe harbors for deferred exchanges, see
sec. 1.1031(k)-1, Income Tax Regs., under the statutory
limitations imposed on such exchanges by section 1031(a)(3), as
enacted by Deficit Reduction Act of 1984, Pub. L. 98-369, sec.
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