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that the Ocean Vista and Royal Towers transactions were
conditional on effecting a section 1031 exchange.
Petitioner’s contentions might be relevant in determining
whether a transaction is in substance an exchange or a sale of
like-kind property. See Alderson v. Commissioner, 317 F.2d 790
(9th Cir. 1963), revg. 38 T.C. 215 (1962). In the instant case,
however, they have little relevance. In the first instance,
respondent does not contend that the transactions in question
were disguised sales or otherwise fail to meet the general
requirements of section 1031(a)(1). More fundamentally, section
1031(f) presupposes that an exchange to which it applies
otherwise meets the requirements of section 1031(a)(1). See sec.
1031(f)(1)(B). Even if Teruya never intended to make a direct
sale of the relinquished properties, this does not mean that
section 1031(f) is not implicated or that the deferred sale was
not structured so as to avoid Federal income taxes. The economic
substance of the transactions remains that the investments in
Ocean Vista and Royal Towers were cashed out immediately and
Times, a related person, ended up with the cash proceeds.
With respect to the Ocean Vista transaction, petitioner
contends that there was no tax avoidance purpose because Times
recognized a gain on its sale of Kupuohi II ($1,352,639) that was
larger than the gain Teruya would have recognized ($1,345,169)
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