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V. Non-Tax-Avoidance Exception
Petitioner argues that Teruya’s continued investment in
like-kind properties meets the requirements of the non-tax-
avoidance exception under section 1031(f)(2)(C), as subsumed
within section 1031(f)(4). Section 1031(f)(2)(C) provides that
there shall not be taken into account any disposition “with
respect to which it is established to the satisfaction of the
Secretary that neither the exchange nor such disposition had as
one of its principal purposes the avoidance of Federal income
tax.”12
With respect to both the Ocean Vista and Royal Towers
transactions, petitioner contends that “there was no intent to
disguise an actual sale of the relinquished property in order to
reduce or avoid gain recognition on such sale, because a sale of
the relinquished property was not intended in the first place.”
In other words, petitioner contends that from the outset of both
transactions, Teruya intended to qualify for deferred like-kind
exchange treatment and did not intend to make direct sales of the
properties. Petitioner points to the fact that Teruya, Times,
Golden, the Association, and Savio agreed in various documents
12 In other contexts involving similar language, we have
applied a “strong proof” standard. See, e.g., Schoneberger v.
Commissioner, 74 T.C. 1016, 1024 (1980). Because it makes no
difference to the outcome of this case, we do not apply any
heightened standard of proof.
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