Wittig v. Comm'r: taxing liability relief in a deferred exchange

Article Abstract:

The Tax Court's Wittig opinion, subsequently withdrawn, held the IRC Section 1031 exchange liability netting rule was inapplicable when new taxpayer liabilities were incurred in taking on replacement property. Normally, the rule permits gain to be determined by netting the excess of relinquished and replacement liabilities. The ruling covered both the uses of new cash to offset boot and attorneys as intermediary trustees. The withdrawal of this ruling should alert the US government to the weakness and contradictions of its position on liability relief.

Cases

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What does it mean to receive the designated property in an exchange?

Article Abstract:

A taxpayer must receive either the designated or substantially the same property in a tax-free real estate exchange or face possible tax consequences. For example, replacement property changes in agricultural or unimproved land exchanges can result in a recipient's tax liability. A series of examples illustrates the tax ramifications when changes are made to the designated property.

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How do you identify replacement property in a deferred exchange?

Article Abstract:

The IRC sec. 1031 deferred exchange regulations require proper identification of replacement property. The regulation clearly specify the identification period, the written designation required, and the transmission and contents rules for this designation. Multi-owner properties and situation involving personal property are also described in the regulations.

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