Revenue Ruling 90-34

Taxpayer X held Blackacre for productive use in trade or business. Blackacre was unencumbered real property with a fair market value of $1 million. In May 1989, X and another party, Y, entered into a contract under which X would transfer Blackacre to Y, and Y would transfer property of a like kind with the same fair market value to X. The contract provided that X would identify the like-kind property within 45 days of X’s transfer of Blackacre to Y, and Y would then purchase and transfer the identified property to X before the earlier of (1) 180 days from X’s transfer of Blackacre or (2) the due date of X’s federal income-tax return for the taxable year in which the transfer of Blackacre occurred. On May 23, 1989, X transferred Blackacre to Y pursuant to the contract. A few days later, X identified Whiteacre as the like-kind property X wanted to receive in the exchange. Whiteacre was owned by Z and was unencumbered real property with a fair market value of $1 million. In July 1989, Y purchased Whiteacre from Z and directed Z to transfer legal title to Whiteacre directly to X. Under § 1031(a)(1) of the Internal Revenue Code, certain exchanges of like-kind property qualify for nonrecognition of gain or loss. The Internal Revenue Service issued a revenue ruling that discussed whether the exchange of Blackacre for Whiteacre qualified for nonrecognition as to X, even though Y never held legal title to Whiteacre.