and i didn't expect or want that recognition this morning while this case is superficially similar to through your brother's and she feels in fact it involves three issues that were not decided in those cases and when those issues are properly reviewed it becomes clear i submit that this case should be reversed and decided in favor of the taxpayer and that can be done without doing violence to the general teachings of the three brothers case because this case in fact involves unique facts first in this case there was no base is shifting of use the congressional history of section ten thirty one f teaches that congress was focused on the idea of people bases shifting that is exchanging low bases property for high bases property and then removing the gain of from taxation that did not occur here in fact the opposite occurred what happened  beijing understanding is that with regard to one of the properties there was a higher basis and also on the net operating loss attribution as to the second it was only a net operating loss brothers decision and i think that it was the fact come to other considerations that are relevant here but it was the overwhelmingly large transaction the court noted in footnote thirteen that the congressional history showed that the caught up with the congress was concerned about basis shifting and noted that through your brothers did not argue that there was the absence of basis shifting that case because in fact viewed as a whole with both transactions taken together and the economic unit taken together they could not make that argument so here we can and do make that argument we did before the tax court as well the theory that there was no basis shiftiness what but in the congressional history it says that the court is focused on it at that said that the congress was focused on the abuse that's entailed in basis shifting correct and it's going to show our reason why there was no basis shifting in this case in this case it is because the the instead bottom of page ten forty five in the top of ten forty six it said here the changing economic positions of true un times readily show that the related parties use these exchanges to cash out of an investment in low basis pro y that doesn't mean that high places property is exempt it that's just the facts something this particular case that's true but but the committee reports reflect the fact that generally where there is that it is this lack of base is shifting alone that justifies overturning the tax court i'm saying that is one of several factors that justifies  gained it was at most the excel ration of the use of those in a wells from two thousand from from some later year into two thousand and seven and so therefore all we're talking about then is the time value of money not the not the but the existence of the you know wells or the availability of using the end of wells we're just talking about the time value of money offset it has it did not it did not by two thousand and seven disposes of the exchange property within two years what are we to make of that language in terms of your argument that your factual situation can be distinguished because because congress indicated tax court found that the structure that involve the exchange of related parties was not set was not set with any related party in mind that structure was created at a time when the taxpayer intended to engage in an exchange with an independent party and the concept of engaging in an exchange with a related party came into being only after the structure had been set only after the if change property had been the initial property had been sold and the funds were in the hands of the a commentator then as the designation period was running out at the very end of that period did the concept of exchanging with a related party come into being and so we w out whether the taxpayer is engaged in some sort of tax avoidance motivated abuse in the tax court say that it's irrelevant that previously held that they're not there was a pre arranged plan was really because we have no no per pre planned structure where the tax expert are intended to go into an exchange with a related party they intended to do the opposite and then when they when their efforts to find exchange with the related party was planned months in advance if you know you know moby what happens is they designate the exchange the accommodate or and then six days later they have fixed on the idea that they're going to do the exchange with the related party then they proceed further and sell the first property to the third party the exchange or holds and then they move forward this is the opposite here the tax court found that it was that as of the time of the closing of the initial sale to the unrelated party they had not no one had conceived of the idea of doing an exchange with with the related party that comes up only at the end as time is running out and they need some some exchange and at that point the exchange not low basis for high basis but high basis for low basis and it's true that they are able to use in a wells to avoid the immediate taxation but as the court noted in footnote twelve and in be that there's nothing in their record to suggest that this was really a viable company that would ever make a profit is right but i don't think that's true i think i think the record reflects there are minutes that are part of the record that shows as been used but that's not only inappropriate speculation but actually wrong i'd like to reserve the remaining minute of my time for  it please the court richard farber for the commissioner i think it's important to get back to what ten thirty one was intended to do and why this transaction as the tax court found violates the related party provisions of ten thirty one ten thirty one was designed to allow a taxpayer to defer paying tax i gain realized on exchange of property on the theory that he hasn't cashed out his investment he's continuing it through different property and so the tax is that the further until he disposes of that exchange property what congress was concerned with was that related parties were actually cashing out the taxpayer itself wasn't getting the proceeds the related party was right but then it didn't i mean the reason i have a hard time when dealing with these tax transactions and which ones are unclean manipulative is that they're all manipulative i mean that this statute is set up to be manipulative right  in that it allows for example for those third party situation it doesn't apply to third parties or to ation to the to the related parties for some reason so i mean that's the basic problem is that when you have because if this had been a direct transaction with the related parties it would be subject to the two year rule but it wasn't one and the islamize this solely as long as you have a third party involved the prohibition on related parties doesn't apply that's not correct your honor and that's correct except for this this caveat that you can't that it can't be to avoid the jetsons it's not quite what what the statute says congress first said you know we know related parties are cashing out but in a direct exchange because exchange property in the related party sells the property and then there's deferral even though one of the properties is cashed out congress and acted section ten thirty  for to prevent parties from reaching that exact same result by using a qualified intermediary so if you compare what would have happened if you were asked to fill out qualified intermediaries in general with regard to these kinds of transactions right now and then those are just examples that congress gave the statute says any exchange which is part of a transaction or a series of transactions structured to avoid the purposes of subpart f won't qualify for ten thirty one treatment or less well that's all the statute says but the courts have said the safe harbor provision of f two which technically only applies to direct exchanges also applies to the structuring chance action the relevance far for is even if you engage in this transaction and you structure it to avoid the purposes of this court focused into roi what does that mean what it what is the purpose of section ten thirty one that the purpose is is to prevent related parties from cashing out an investment where one property is disposed of the proceeds wind up in the hands of a related party and yet they differ again under ten thirty one that's exactly what happens here first of here and the question is what do you do with them and what we have to show with regard to whether that presumably it has value some kind of value to some people depending on the state of the company and whether it was but i actually used them so why are you saying that the this last thing would always apply are only applied here our watch first i would like to point out that ten thirty one itself if you qualify for it's not a tax tax exemptions just tax deferral so the only reason ten thirty one has value to a taxpayer is the time value of money in other words if you can defer paying your million dollar tax liability for ten years you the hawaiian corporation would have paid more in tax than was saved by using ten thirty one and the court found that they're aware of it that mr ewing was on the no committing they were viewed this financial information but so we're talking about the time value of money we had trial here the taxable year two thousand and seven they had and a wells in that year that wiped out all the regular tax when you have an endo well you first have to carry back two years to a five to six those are already closed in the tax court which trial was t thirteen they didn't claim they could have used those in all wells in those years we also had the other years close eight nine ten eleven twelve were all closed they didn't put on any evidence that there was any income that had they l's in two thousand and seven they could have used them so it may well be as my opponent says at some point this year next year i think you have twenty years twenty twenty seven that they'll be able to valuable saving your tax now so so that doesn't negate a tax avoidance even if they're giving up the possible right to save taxes ten fifteen years later it's much more valuable to save the tax now than possibly save the same tax years later that's the whole concept the ten thirty one you don't get to avoid the tax you get to defer it and that's value only because of the time value of money i can assure you if if m i l had income in the carry back years that for a place for a property they were going to do an unrelated party deal and they said this continued until they had forty five days to do it or they would get the proceeds and have to pay the tax so at some point near the end lo and behold they finally found three properties all owned by their own subsidiary corporation and they decided to do the deal but when they did the deal with a related party as opposed to an unrelated party they produced a transaction in economic consequence which is exactly the same as if they had just done a direct exchange with m i l n m i l it sold the marilyn ark and sell it to third party they had to realize tax consequences and there if they sold it if they didn't exchange with an unrelated party they were never there would have been any cash proceeds going to anybody they would have new property and they'd they'd have a carry over basis and never not be recognized no but what happened was when they finally decided to do or a deal with the related party they cashed out the unrelated buyer paid cash for the maryland property that cash wound up in m i l related court as to roy it holds that's the same as if the tax payer to got the proceeds but you have to look at it as an economic unit or looking at it differently before this transaction an issue the economic unit own maryland property and the hawaii property after the transaction they only own the hawaii property and the proceeds from the from the disposition of the maryland property was in m i l z hands that defeats the purposes of f two which is to prevent parties that you know from from cashing out and using ten thirty what there is one safe harbor f two provides a safe harbor even though they had cashed out the same is if there's a direct exchange of properties disposed of within two years there's still the safe harbor you still can use ten thirty one if you meet this final test which is to establish that tax avoidance was not one of the principal purposes the court found they fail to meet that burden that the finding of fact and they haven't shown is clearly erroneous in fact if you look at the transcript they have never given a non tax reason for going ahead with the related party change when they couldn't do a unrelated court exchange what they what the testimony was time was running out we wanted to use ten thirty one which is tax avoidance so we went ahead with it they never said there was any benefit to becoming the direct owner of the hawaii property when they were already the controlling owner of it through their seventy percent voting control of m i l they never said that all they said was we wanted to take advantage of ten thirty one that's a tax receipt and in terms of what did they accomplish they accomplished the attack savings of six hundred thousand dollars looking at the economic unit because although hawaii realized this three million dollar gain that would have been a million dollar tax bill they wiped out within a wells of which they're well aware and they were left with a tax bill of forty four thousand for alternative minimum tax on the other hand the tax fair avoided six hundred seventy thousand so together the economic unit save six hundred thirty thousand dollars in a transaction that made no sense other than to save that six hundred thirty thousand there was no benefit to doing the related party change other than they didn't want to pay the tax gain was actually slightly bigger than the gain the tax payer deferred but the related party had n o l's and wiped wiped it out so that tax savings for the group was was the amount of tax that would have been due from the taxpayer it's the same thing here m i l had recognized gains much bigger then was then the taxpayer ceased to defer but because of the n r wells the economic unit saved six hundred sixty thousand it might be ten years from now or something m i l would to tional taxes but because of the time value of money that's insufficient to negate the court's finding that tax avoidance was a principal purpose for going ahead with the related party transactions under the exchange agreement the taxpayer was intitled to get these proceeds back in its hands at the expiration of the forty five day period for identifying properties if no properties were then a fight so if they had just let that forty five day period expired they would have gotten the proceeds instead they went ahead because they knew it was going to say them six hundred thousand this is what these provisions are designed to prevent that there's really no difference between this case mobi and to roy there's a cashing out by related parties  property with the proceeds winding up in the hands of related party the fact that hughes and wells to produce the tax avoidance but rather basic shifting is not relevant under the statute or the case law in fact in all mogi the tax avoidance was because they shifted the incidents to a related party who was subject to tax at fifteen percent as opposed to thirty four percent that the taxpayer was subject to there's there's numerous ways that related parties can save taxes in basi shifting is only one example and is hardly controlling if that wasn't the real the way they saved taxes as an economic unit here the court has no further questions i would submit the courts that affirm the tax court it's a let me go back if i could one question you asked about the language in section f ten thirty one f one c two which talks about the taxpayer doing a direct exchange with a related party that is not triggered here because of the intermediary what's triggered and the way into the exceptions to the ten thirty one is ten thirty one to four which is the structuring and here as here all that happens is that the techs the taxpayer has run out of time to designate the exchange property they need to designate exchange property and they do it with the related party not because