Supreme Court rejects related-party Sec. 1031 swap appeal

The Supreme Court yesterday declined to grant a hearing to a Hawaii taxpayer who acquired replacement party in a Sec. 1031 exchange from a related party (via Tax Analysts, $link).
Teruya Brothers had their exchange intermediary use the proceeds of the sale of property to outsiders to acquire replacement property from a related corporation. The Tax Court and the Ninth Circuit recast the deal as a swap between the related corporation and Teruya Brothers, followed immediately by a sale by the corporation to outsiders. The tax law says an exchange between related parties normally fails if the related party disposes of the property within two years, so recasting the transaction made it immediately taxable.
The Moral: If you sell a property through an intermediary to qualify for Sec. 1031 treatment, don’t use the proceeds to buy a property from a related party.
Related:
A LIKE-KIND EXCHANGE DISASTER (RELATIVELY SPEAKING)
1031 swap with related LLC shot down
IRS ISSUES LIKE-KIND EXCHANGE ‘FACT SHEET’