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located.
We hold that the TEPCO and WEF coal supply contracts created
servitudes obligating Santa Fe and successive owners of the Lee
Ranch mine to mine and supply coal to the buyer/utility and that
those servitudes are real property interests under New Mexico
law. See 1 Restatement, Property 3d (Servitudes), sec. 2.1 cmt.
b, illus. 4.
II. Like-Kind Status of the Supply Contracts Under Section 1031
A. Petitioner’s Arguments
Petitioner contends that the real property status of the
supply contracts under New Mexico law should be determinative of
the like-kind issue; i.e., should automatically qualify the
contracts as like-kind property to the gold mining property under
section 1031(a). In support of this argument, petitioner, among
other things, relies on this Court’s holding in Or. Lumber Co. v.
Commissioner, 20 T.C. 192, 196-197 (1953). Petitioner notes that
this Court held in Or. Lumber Co. that the rights to harvest
standing timber were personal property under Oregon law and
therefore were not like-kind property to land (real property)
received in exchange.
If the status of the supply contracts as real property is
held not in and of itself to be dispositive, petitioner
alternatively argues the supply contracts are like-kind property
to the gold mining property because the contracts (including
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