Teruya Brothers, Ltd. & Subsidiaries - Page 13

                                       - 13 -                                         
          the investment, and the original exchange should not be accorded            
          nonrecognition treatment.”  Id.  This policy is reflected in                
          section 1031(f), as enacted in the Omnibus Budget Reconciliation            
          Act of 1989, Pub. L. 101-239, sec. 7601(a), 103 Stat. 2370.                 
               Congress was also concerned that related persons not be able           
          to circumvent the purposes of this rule by using an unrelated               
          third party:                                                                
                    Nonrecognition will not be accorded to any                        
               exchange which is part of a transaction or series of                   
               transactions structured to avoid the purposes of the                   
               related party rules.  For example, if a taxpayer,                      
               pursuant to a prearranged plan, transfers property to                  
               an unrelated party who then exchanges the property with                
               a party related to the taxpayer within 2 years of the                  
               previous transfer in a transaction otherwise qualifying                
               under section 1031, the related party will not be                      
               entitled to nonrecognition treatment under section                     
               1031. [H. Rept. 101-247, supra at 1341.]                               
               Equating a qualified intermediary with the “unrelated party”           
          referred to in the above-quoted example, respondent reads the               
          example to mean that a deferred exchange between related parties,           
          involving a qualified intermediary, should be recast as a direct            
          exchange between the related parties.  If section 1031(f)(1)                
          would preclude nonrecognition treatment for the recast                      
          transaction, respondent concludes, then the deferred exchange               
          should be deemed to have been structured to avoid the purposes of           
          section 1031(f).  Respondent suggests that such an analysis ends            
          the inquiry under section 1031(f)(4).                                       

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011