Like Kind Exchanges
i.    Code: 1031(a)-(d), 453(f)(6)
ii.    Reg: 1.1031(a)-1; 1.1031(b)-1; 1.1031(b)-2; 1.1031(d)-1; 1.1031(d)2; 1.1031(j)-1(a), (b)
2.    this is not a sale, no sale!
3.    if 1031 applies, it applies, no election, you are stuck with it!
a.     1001(c) provides a general rule requiring recognition of any gain or loss realized on the disposition of property
b.    1031 provides an exception to this rule by permitting the exchange of qualifying, like-kind property w/out the immediate recognition of realized gain or loss.  In effect, §1031 temporarily defers taxable gain from GI and defers the recognition of losses that might otherwise reduce the taxable income w/ regard to a specific type of property disposition.
4.    There are two important policies underlying 1031:
a.    a taxpayer who continues an investment in newly acquired property that is of a like kind to the property the taxpayer transferred has not changed the economic substance of ownership;
b.    b/c the taxpayer who has received like kind property has not cashed in his investment, it is equitable to defer recognition and the accompanying tax consequences until there is a taxable disposition of the newly acquired property.
5.    Three strict requirements must be met in order to qualify for 1031:
a.    Both the property given and the property received must be held for “productive use in trade or business or for investment.
i.    Thus the exchange of one’s personal auto will not qualify
b.    The transaction must qualify as an exchange as distinguished from a ale and purchase; in an exchange, property is transferred in return for other property.
i.    Thus if the taxpayer sells qualifying property and immediately reinvest the proceeds in other qualifying property the exchange requirement is not met
c.    The properties exchanged must be of like kind
i.    Reg 1.1031(a)-1(b) state that the term like kind refers to the “nature or character of the property and not to is grade or quality”
1.    example: real estate = real estate, regardless of the grade or quality
2.    1.1031(a)-2(b)(1) establishes detailed rules for compliance with the like kind standard as regards to depreciable tangible property held for productive use in a business and intangible property, also includes personal property
ii.    1031 non-recognition need not apply to all parties to a transaction; whether a taxpayer meets the requirements of 1031 is determined solely in regard to that taxpayer
6.    Click v. Commissioner (1982)
a.    Does exchange of farmland for two residential properties, cash, and a note qualify for non-recognition under 1031?
b.    first, Click deals with the question of whether or not this property was held with the intention of investment and it was decided no.
i.    it was clear from the facts of the case that the land was for the kids
1.    Ascher says: that with some tweaking, there could have been a change in the outcome
c.    second, 1031(a)(1) says an “exchange” of property, well in Click there was cash and a note; however, 1031(b) allows you to have “boot” that will be taxable, but it will not taint the rest; need to see and read 1031(a) & (b)