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transactions) structured to avoid the purposes of this subsection
[(f)].” Inasmuch as the statute does not directly identify or
describe the purposes of subsection (f), we turn our attention to
the legislative history.
III. Legislative History: Purposes of Section 1031(f)
Property acquired in a like-kind exchange generally takes
the basis of the property relinquished. See sec. 1031(d). In
other words, there is a “shifting” of tax basis between the
relinquished property and the replacement property. See H. Conf.
Rept. 101-386, at 613 (1989).
Before 1989, Congress was concerned that because of this
basis-shifting effect, “related parties * * * engaged in like-
kind exchanges of high basis property for low basis property in
anticipation of the sale of the low basis property in order to
reduce or avoid the recognition of gain on the subsequent sale.”
H. Rept. 101-247, at 1340 (1989). In effect, because of basis
shifting, related persons were able to “cash out” of their
investments in property having an inherent gain at relatively
little or no tax cost. See id. Also, in some cases, basis
shifting allowed related persons to accelerate a loss on property
that they ultimately retained. See id. Responding to these
perceived abuses, Congress concluded that “if a related party
exchange is followed shortly thereafter by a disposition of the
property, the related parties have, in effect, ‘cashed out’ of
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