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after buyers for the Clark Hill property had been found, through
an intermediary, exchange the Clark Hill property for the escrow
agent’s 25-percent interest in the Lake Lanier property in a
transaction intended to qualify as a deferred like-kind exchange
satisfying the requirements of section 1031(a)(3) and section
1.1031(k)-1, Income Tax Regs. Respondent denies the authenticity
of much of petitioners’ supporting documentation and alleges that
(1) the escrow agent was, in substance, acting as petitioners’
agent in acquiring a 25-percent interest in the Lake Lanier
property so that petitioners already owned that property before
the purported like-kind exchange; i.e., there was no “exchange”
of like-kind properties, and (2) petitioners otherwise failed to
satisfy the requirements of section 1031(a)(3) and the
regulations thereunder for a deferred like-kind exchange.
In order for petitioners to prevail on the section 1031
issue, the evidence must show that (1) the Clark Hill and Lake
Lanier properties were of like kind (a matter not in dispute),
(2) petitioners held both properties for investment,4 and (3)
they disposed of the former and acquired the latter in a manner
that satisfied the requirements of section 1031(a)(3) and the
regulations thereunder for a deferred like-kind exchange.
4 Petitioners do not claim that either property satisfied
the alternative definition of qualified like-kind property:
“property held for productive use in a trade or business”. Sec.
1031(a)(1).
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Last modified: November 10, 2007