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soon as the facility to be built thereon to his specifications
was substantially completed.
The reconveyance to petitioner of the Lawrence Drive
property was not part of an exchange by petitioner of the
McDonald Street property. That reconveyance of the Lawrence
Drive property to petitioner merely reunited in his hands the
bare legal title to the Lawrence Drive property with the
beneficial ownership therein that he had continued to hold all
along while the building that he obligated himself to pay for was
being built to his specifications.
In support of their claim that petitioner exchanged the
McDonald Street property for the improved Lawrence Drive
property, petitioners point out that the improved Lawrence Drive
property was different from the unimproved Lawrence Drive
property that he acquired in 1992 and whose title he transferred
to WLC on September 24, 1993. Petitioners state: “Petitioners
sold unimproved land (and reported the transaction) and in the
exchange got back improved real estate they could continue their
business operation in.” It’s true that unimproved property and
improved property are different from each other; they are not
“similar or related in service or use” for the purpose of the
section 1033 rollover provision. See sec. 1.1033(a)-2(c)(9),
Income Tax Regs. However, the transformation of the Lawrence
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