Article: QI no cure for related-party deal.(qualified intermediary)

The Tax Court reaffirmed its 2005 holding that use of a qualified intermediary in a section 1031 exchange of like-kind property does not bypass restrictions on such exchanges between related parties. In evaluating whether tax avoidance was a principal purpose of such a transaction for purposes of the exception to those restrictions under IRC [section] 1031(f)(2)(C), the court held that basis shifting between the parties establishes an inference of tax avoidance.

Under IRC [section] 1031 no gain or loss is recognized when a taxpayer directly, or indirectly through a qualified intermediary, exchanges property used in a trade or business solely for like-kind ...

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