Tax Free Swaps PDF Download

Thirty years have passed since the Ninth Circuit decided Bolker, granting section 1031 nonrecognition to an exchange of property that the exchanger received from a corporation in a tax-free liquidation. The Bolker opinion establishes that a person can satisfy the section 1031 holding and use requirements, even though the person receives property with the intent to transfer it as part of a section 1031 exchange. Even though little has happened in this area of the last over the last thirty years, property owners and their advisors continue to worry about properly structuring transactions that are similar to the Bolker transaction. This article reviews Bolker and the few rulings and cases that consider similar transactions and the authority that presents other doctrines that could apply to them. It also considers problems that can crop up in these types of transactions and steps that property owners and their advisors can take to avoid those problems. Finally, it anticipates arguments that the IRS and state taxing authorities may make in challenging the tax-free treatment of Bolker-like transactions and considers the viability of such arguments.