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Tax Regs. (the bona fide intent test).7 Accordingly, we focus
our inquiry on that aspect of the bona fide intent test.
On reply brief, respondent argues as follows:
Here, petitioner’s intent was always to acquire
precisely the type of replacement property he
ultimately acquired. There is no evidence anywhere in
the record to suggest that petitioner intended to
acquire as replacement property anything but a fee
simple interest in timberland. Since the replacement
properties and the relinquished property are not like
kind, petitioner’s intent from the outset was to
acquire replacement property that was not of like kind
with the relinquished property and Treas. Reg. sec.
1.1031(k)-1(j)(2)(iv) does not apply. The regulation
does not address the situation such as here where the
taxpayer actually acquires the replacement property he
intended to acquire and which does not qualify as like
kind with the relinquished property.
Respondent’s argument is at odds with the bona fide intent test
as described in his own regulations, which requires only that it
be “reasonable to believe” that like-kind replacement property
will be acquired within the requisite exchange period. Sec.
1.1031(k)-1(j)(2)(iv), Income Tax Regs.
As explained in greater detail below, we conclude that at
the commencement of the exchange period for the subject
transaction, petitioner had a bona fide intent that he would
satisfy the like-kind deferred exchange requirements. This
conclusion is bolstered by the fact that respondent has
7 For instance, respondent does not contend that petitioner
did not reasonably believe that he would acquire replacement
property within the requisite 180-day period.
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