Thomas C. Sandoval, Jr. and Bobbie J. Sandoval - Page 13

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          cost of the signs, who paid for them, or when those payments were           
          made.  We conclude that petitioners may not increase the basis in           
          the Hoefgen Avenue property based on the future contract value of           
          the two outdoor signs.                                                      
          C.   Whether the Babcock Road and Warfield Drive Properties                 
               Qualify as Replacement Property for the Hoefgen Avenue                 
               Property Under Section 1033                                            
               1.   Background and Contentions of the Parties                         
               A taxpayer who sells under threat of condemnation real                 
          property held for business use or investment may defer                      
          recognition of the gain if he or she buys property of like kind             
          to the converted property within 3 years after the closing of the           
          first taxable year in which any part of the gain from the sale is           
          realized.  See sec. 1033(a)(1), (g)(1), and (g)(4).  Principles             
          used for deciding whether an exchange is like kind under section            
          1031 also apply in deciding whether replacement property is                 
          property of a like kind under section 1033.  See sec. 1.1033(g)-            
          1(a), Income Tax Regs.  An exchange of a fee interest in real               
          property for an interest in a partnership does not qualify as an            
          exchange of like-kind property.  See M.H.S. Co. v. Commissioner,            
          T.C. Memo. 1976-165, affd. 575 F.2d 1177 (6th Cir. 1978); sec.              
          1.1031(a)-1(b), Income Tax Regs.                                            

          Inc. v. United States, 444 F.2d 677, 683-684 (5th Cir. 1971).               

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