Section 1031 Exchanges: Death of a Related-Party Exchange — Did ‘Butler’ Do It?

Abstract

In N. Cent. Rental & Leasing v. United States, the Eighth Circuit Court of Appeals affirmed a district court in disqualifying from Section 1031 nonrecognition an equipment leasing company that bought its replacement equipment from an affiliated equipment dealer. In so doing, the appeals court failed to acknowledge the possible existence of an exception to Section 1031(f)(4) disallowance for replacement property originally acquired by a related party in anticipation of an exchange. This Article discusses the holding and its broader effects on the law of related-party exchanges.

Keywords: Section 1031 exchange, section 1031(f), related-party exchange, like-kind exchange, equipment exchange, program exchange