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The Tax Court held--and the Court of Appeals affirmed--that
the transaction was in effect the purchase of a new facility, and
not an exchange of unimproved property for improved property,
inasmuch as the taxpayer already owned the land on which the new
plant was constructed. The contractor could not be a party to an
exchange with the taxpayer because the contractor was never the
owner of the property that the taxpayer received in the so-called
exchange. The contractor was merely acting as a service provider
in the construction of the new plant. The only real property to
which the contractor acquired title was the land and old plant
that it received as part payment for the construction services it
provided.
The subject transactions are similar to those in Bloomington
Coca-Cola Bottling Co. v. Commissioner, supra, in significant
respects. The taxpayer sold its old bottling plant (petitioner
sold the McDonald Street property) to the only other party it was
dealing with, the contractor (WLC). The taxpayer hired a
contractor to build a new facility on land that it owned. In the
case at hand, petitioner’s conveyance of title to the unimproved
Lawrence Drive property and the conveyance of that property back
with a substantially completed building on it are to be
disregarded; WLC never acquired any of the benefits and burdens
of ownership of the Lawrence Drive property. WLC acquired no
equity or beneficial interest in the Lawrence Drive property, no
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