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their kind or class. The new coal mine property is of a like
nature or character to the gold mining property Peabody
exchanged. By exchanging the gold mining property for the coal
mining property subject to the supply contracts, Peabody is
essentially continuing the original investment which remains
fully unliquidated. See Commissioner v. P.G. Lake, Inc., 356
U.S. at 268. Respondent, contrary to our holding in Koch, is
attempting to fragment and currently tax Peabody on the supply
contracts before their actual realization.
We hold that the coal mine subject to the TEPCO and WEF
supply contracts Peabody received is like kind to the gold mining
property transferred and that Peabody’s exchange qualifies for
nonrecognition treatment under section 1031(a). See Koch v.
Commissioner, 71 T.C. 54 (1978). In the light of that holding
and because the supply contracts cannot be separated from
Peabody’s ownership of the Lee Ranch mine coal reserves, it
follows that those contracts are not taxable as other property or
boot under section 1031(b). See id.
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