Teruya Brothers, Ltd. & Subsidiaries - Page 10

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          treatment, provided generally that the taxpayer identifies the              
          new property within 45 days and receives it within 180 days of              
          transferring the old property.  See sec. 1031(a)(3).  To                    
          facilitate such a deferred exchange, the taxpayer may use a                 
          qualified intermediary; i.e., a person who is not the taxpayer,             
          an agent of the taxpayer, a related person to the taxpayer, or a            
          related person to an agent of the taxpayer, see sec. 1.1031(k)-             
          1(k), Income Tax Regs., who enters into a written exchange                  
          agreement with the taxpayer and, as required by this agreement,             
          acquires property from the taxpayer, transfers this property,               
          acquires like-kind replacement property, and transfers this                 
          replacement property to the taxpayer.  Sec. 1.1031(k)-                      
          1(g)(4)(iii), Income Tax Regs.                                              
               Teruya used a qualified intermediary, TGE, to facilitate its           
          transfers of Ocean Vista and Royal Towers and its acquisitions of           
          Kupuohi II, Kupuohi I, and Kaahumanu.  Respondent does not                  
          dispute that these transactions meet the general requirements for           
          like-kind exchanges under section 1031(a)(1).  Respondent                   
          contends, however, that section 1031(f) requires petitioner to              
          recognize gains on the transactions.                                        
          II.  Rules Applicable to Related-Person Exchanges                           
               Section 1031(f)(1) provides generally that if a taxpayer and           
          a related person exchange like-kind property and within 2 years             
          either one disposes of the exchanged property, the nonrecognition           

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Last modified: May 25, 2011