Abstract

http://ssrn.com/abstract=2404571
 


 



Are Related-Party Acquisitions in Anticipation of Exchange Technically and Theoretically Valid?


Bradley T. Borden


Brooklyn Law School

Alan S. Lederman


Akerman, Senterfitt

Kelly E. Alton


Nationwide Exchange Services

March 4, 2014

Journal of Taxation, Vol. 120, No. 52, 2014
Brooklyn Law School, Legal Studies Paper No. 299

Abstract:     
The purposes of Section 1031(a) (the general nonrecognition provision) and Section 1031(f) (the provision governing related-party exchanges) suggest that a related party’s acquisition of replacement property in anticipation of transferring it to an exchanger should not trigger the operation of Section 1031(f)(4). Nonetheless, related party transactions are subject to close scrutiny under sham transaction, substance-over-form, and anti-abuse doctrines. A District Court’s failure to recognize the distinctions among laws governing such transactions makes the decision a prime candidate for a more enlightened approach by the Eighth Circuit on appeal. This article examines the purposes and applications of Sections 1031(a) and 1031(f) and reveals that the District Court erred by applying a Section 1031(a) analysis to a transaction that came within Section 1031(f). It illustrates that an exchange should qualify for Section 1031 nonrecognition if a related party acquires property in anticipation of an exchange and transfers it to the exchanger. If the related party or exchanger is a sham entity or if the related party is the exchanger’s agent, however, the transaction may fail to qualify for Section 1031 nonrecognition. Because the District Court failed to appreciate this distinction, its opinion leaves something to be desired.

Number of Pages in PDF File: 22

Keywords: Section 1031, section 1031(f), related-party exchanges, North Central, acquisition in anticipation of exchange, exchange program

Accepted Paper Series


Download This Paper

Date posted: March 5, 2014 ; Last revised: May 22, 2014

Suggested Citation

Borden, Bradley T. and Lederman, Alan S. and Alton, Kelly E., Are Related-Party Acquisitions in Anticipation of Exchange Technically and Theoretically Valid? (March 4, 2014). Journal of Taxation, Vol. 120, No. 52, 2014; Brooklyn Law School, Legal Studies Paper No. 299. Available at SSRN: http://ssrn.com/abstract=2404571

Contact Information

Bradley T. Borden (Contact Author)
Brooklyn Law School ( email )
250 Joralemon Street
Brooklyn, NY 11201
United States

Alan S. Lederman
Akerman, Senterfitt ( email )
One Southeast Third Avenue
25th Floor
Miami, FL 33131-1714
United States
Kelly E. Alton
Nationwide Exchange Services ( email )
50 West San Fernando Street
Suite 300
San Jose, CA 95113
United States
Feedback to SSRN


Paper statistics
Abstract Views: 160
Downloads: 31

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.219 seconds