M. Michael Stewart - Page 4

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          Earl’s death, petitioner decided to offer the condominium for               
          rent and in fact rented it for a period of time.  On July 20,               
          2001, petitioner sold the condominium for $345,000.  The parties            
          agree that petitioner’s basis in the condominium was $253,576 and           
          petitioner’s gain on the sale was $111,715.                                 
               The proceeds of the sale of the condominium were deposited             
          with First American Exchange Corporation (FAEC), as petitioner              
          intended to purchase other property in a like-kind exchange                 
          pursuant to section 1031.  In a letter dated October 30, 2001,              
          petitioner requested, through her attorney, a return of the funds           
          held by FAEC.  The letter stated among other things:                        
               Although it is outside the normal business practice of                 
               First American Exchange Corporation of California to                   
               release these funds and the release may be prohibited                  
               pursuant to Paragraph 8.2 of the above mentioned                       
               agreement as well as disallowed pursuant to section                    
               1.1031(k)-1(g)(6) of the IRC, Exchangor has determined                 
               that it is impossible for qualified intermediary to                    
               acquire any of the identified Replacement Properties                   
               because they have been sold to other parties and are no                
               longer for sale and therefore has made the above demand                
               for the release of the funds.  First American Exchange                 
               Corporation of California is hereby held harmless from                 
               and against any and all tax liabilities, which may or                  
               may not be incurred by the Exchange or due to this                     
               release or any other matters relating to the Tax                       
               Deferred Exchange transaction and the property or                      
               properties contained therein.                                          
          In a letter dated November 7, 2001, FAEC advised that the funds             
          were wired to petitioner’s account on October 31, 2001.  FAEC               
          also forwarded with the letter a copy of a Form 1099 to                     
          petitioner.  Petitioner did not purchase other property in                  






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