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77(b), 98 Stat. 596. These regulations, with their provisions
for use of third-party “qualified intermediaries” as
accommodation titleholders, who will not be considered the
taxpayer’s agent in doing the multiparty deferred exchanges
permitted by the regulations, have encouraged the growth of a new
industry of third-party exchange facilitators.
The subject transactions present a case of first impression
in this Court. They reflect the effort of petitioner and his
advisers to implement a so-called reverse exchange directly with
WLC, without the participation of a third-party exchange
facilitator. Reverse exchanges have been described as
transactions in which the taxpayer locates and identifies the
replacement property (and acquires it or causes it to be acquired
on his behalf by an exchange facilitator) before he is ready to
transfer the property to be relinquished in exchange. The
preamble to the deferred exchange regulations, sec. 1.1031(k)-1,
Income Tax Regs., made clear the Commissioner’s view that section
1031(a)(3) and the deferred-exchange regulations do not apply to
reverse exchanges. See T.D. 8346, 1991-1 C.B. 150, 151.
The Commissioner has recently responded to industry and
practitioner requests for guidance5 by publishing a revenue
5 See, e.g., American Bar Association Section on Taxation,
Committee on Sales, Exchanges and Basis, Report on the
(continued...)
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