IRS is rethinking its position on sec. 1031 followed by a corporate reorganization.

• Jurisdiction: United States
• Author: Zachariah, Allan J.
• Date: 01 May 1997

Sec. 1031(a)(1) provides that no gain or loss shall be recognized on the exchange of property held for the productive use in a trade or business or for investment, if such property is exchanged solely for property of a like kind that is to be held either for productive use in a trade or business or for investment. Pursuant to Sec. 1031(a)(3), any property received by the taxpayer (the replacement property) will be treated as if it is not of a like kind to the property transferred (the relinquished property), if the replacement property is (1) not identified within 45 days of the taxpayer's transfer of the relinquished property or (2) received after the earlier of (i) 180 days after the taxpayer's transfer of the relinquished property or (ii) the due date of the taxpayer's return for the year in which the taxpayer's transfer of the relinquished property occurred.

There are many instances in which a corporation may be in the middle of satisfying the requirements of Sec. 1031(a)(3) when it becomes involved in a...