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OPINION
I. The Section 1031 Issue
A. Analysis
As noted supra, the issue before us is whether petitioners
held the Clark Hill and Lake Lanier properties “for investment”.
That depends on their intent or purpose in holding the
properties, determined as of the time of the exchange. E.g.,
Bolker v. Commissioner, 81 T.C. 782, 804 (1983), affd. 760 F.2d
1039 (9th Cir. 1985).
Petitioners point to their interest in the appreciation
potential of the Clark Hill and Lake Lanier properties, both
before and after acquisition, and argue: “If investment intent
is one motive for holding * * * property, it is held for
investment for purposes of Section 1031.” Petitioners’ argument,
if carried to its logical extreme, is that the existence of any
investment motive in holding a personal residence, no matter how
minor a factor in the overall decision to acquire and hold (or
simply to hold) the property before its inclusion in an exchange
of properties, will render it “property * * * held for
investment” with any gain on the exchange eligible for
nonrecognition treatment under section 1031. Petitioners are
mistaken. It is a taxpayer’s primary purpose in holding the
properties that counts. Montgomery v. Commissioner, T.C. Memo.
1997-279 (“section 1031 requires that both the property
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Last modified: November 10, 2007