Reverse-Starker like-kind property exchanges.The preamble to TD 8346, which published the final like-kind exchange and deferred exchange regulations on Apr. 25, 1991, explained that the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. had requested comments on whether reverse-Starker transactions should qualify for tax-free exchange tax-free exchange An exchange of assets between taxpayers in which any gain or loss is not recognized in the period during which the exchange takes place. Rather, taxpayers are required to adjust the basis of assets exchanged. agreement treatment under any provision of Sec. 1031. A reverse-Starker exchange is a transaction in which the taxpayer receives the replacement property prior to the date on which the taxpayer transfers the relinquished property. The preamble notes that the Service had concluded that the deferred exchange rules in Sec. 1031(a)(3) and Regs. Sec. 1.1031(k)-1 did not apply to reverse-Starker transactions. However, these transactions might qualify under the general rules of Sec. 1031(a)(1) or (a)(3). The author understands that some months ago the IRS considered issuing guidance on reverse-Starker transactions in the form of a revenue ruling, perhaps addressing a situation in which the transfer of the relinquished property was subject to governmental review or approval so that the timing of the transaction was not within the control of any of the parties to the transaction. This ruling did not materialize. More recently, a speaker from the U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. Tax Legislative Counsel office suggested that the Treasury might prefer guidance in the form of additional regulations, which would limit nontaxable exchange treatment to reverse transactions under specified circumstances. It was noted that the Treasury position--that reverse-Starker transactions could never qualify as Sec. 1031 exchanges in any situation--might not prevail in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile , the Treasury Department 1992 Business Plan dated May 15, 1992 included a project under Tax Accounting for coordination of the deferred like-kind exchange provisions with the Sec. 453 installment reporting rules. However, this project may not reach reverse-Starker transactions if the drafter of the Business Plan follows the analysis of TD 8346 that a reverse-Starker transaction does not constitute a deferred exchange. A careful tax adviser may, depending on the circumstances, recommend that an escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. arrangement be used so that the taxpayer will not receive the replacement property before transferring the relinquished property. From lames C. Godbout, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , Washington, D.C. |
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