Code Section 1031 Swap-and-Drops Thirty Years after Magneson

8 Pages Posted: 1 Feb 2016

Date Written: January 29, 2016


Thirty years have passed since the Ninth Circuit decided Magneson, granting section 1031 nonrecognition to an exchange of property that preceded the exchangers’ immediate contribution of the replacement property to a partnership. The Magneson opinion establishes that a person can satisfy the section 1031 holding and use requirements, even though the person receives property with the intent to transfer to another entity tax free. A handful of cases, at both the federal and state levels, confirm the holding in Magneson and show that its scope extends beyond the facts in that case. This article reviews Magneson and the cases that have followed. It also considers some of the theoretical issues raised by Magneson, such as whether the type of state-law entity could affect the application of Magneson, and concludes that those issues should not affect the application of the principal holding in Magneson — a valid section 1031 exchange can precede a contribution of property to a tax partnership, regardless of its state-law form.

Keywords: Section 1031 exchange, drop and swap exchanges, drop and swap exchanges, Bolker, Magneson, 1031 and proximate business transactions

Suggested Citation

Borden, Bradley T., Code Section 1031 Swap-and-Drops Thirty Years after Magneson (January 29, 2016). Journal of Passthrough Entities, Vol. 19, p. 11, 2016; Brooklyn Law School, Legal Studies Paper No. 441. Available at SSRN:

Bradley T. Borden (Contact Author)

Brooklyn Law School ( email )

250 Joralemon Street
Brooklyn, NY 11201
United States


Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics