116 T.C. No. 29
UNITED STATES TAX COURT
D. G. SMALLEY AND NELL R. SMALLEY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2767-98. Filed June 14, 2001.
In 1994, H entered into a deferred exchange
whereby he relinquished 2-year timber cutting rights on
his land and in return received in 1995 fee simple
interests in three parcels of real estate. The
transferee’s obligation to transfer replacement
property to H was secured by cash held in a qualified
escrow account as defined in sec. 1.1031(k)-1(g)(3),
Income Tax Regs.
Held: At the beginning of the exchange period, H
had a bona fide intent to enter into a deferred
exchange of like-kind property within the meaning of
sec. 1.1031(k)-1(j)(2)(iv), Income Tax Regs. Under
sec. 1.1031(k)-1(g)(3) and (j)(2), Income Tax Regs., H
was not in actual or constructive receipt of property
in 1994, and under the installment sale rules of sec.
453, I.R.C., Ps are not required to recognize income
from the deferred exchange in 1994.
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