1) Your client, ABC Corporation, structured a like-kind exchange with an unrelated party using a…

1) Your client, ABC Corporation, structured a like-kind exchange with an unrelated party using a qualified intermediary, QI4U.com. Unfortunately, QI4U.com was poorly managed and declared bankruptcy AFTER acquiring the property from ABC but BEFORE completing the exchange. How should this transaction be treated for tax purposes? Assume that any payments recovered in full satisfaction of the intermediary s obligation will not be received for over a year. Also, discuss how the tax treatment differs if the subsequent payment in full satisfaction of the intermediary s obligation exceeds or does not exceed ABC Corporation s basis in the exchanged asset. Support your position with relevant citations from the Internal Revenue Code, Treasury Regulations, IRS Rulings, and court cases.

 

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