Source: https://firstexchange.com/private-letter-ruling-200909008
Timestamp: 2020-04-06 04:52:14
Document Index: 569248891

Matched Legal Cases: ['§ 1031', '§ 1031', '§ 1031', '§ 1', '§ 1031', '§ 1031', '§ 1031', '§ 1031', '§ 708', '§ 1031', '§ 1031']

Private Letter Ruling 200909008 | First American Exchange Company
Private Letter Ruling 200909008
(PLR 2009090008)
This is in response to your request for a private letter ruling dated June 6, 2008. You have asked for a ruling that for purposes of exchanges of property under § 1031 of the Internal Revenue Code, the acquisition of a partnership interest under the facts below by Entity 1 is not inconsistent with such entity's status as an exchange accommodation titleholder ("EAT"), as defined by Rev. Proc. 2000-37, 2000-2 C.B. 308.
Entity 1 acts as an EAT in safe harbor parking arrangements under Rev. Proc. 2000-37 for exchanges of property intended to qualify for nonrecognition of gain or loss under § 1031. Entity 1 is an affiliate of Entity 2.
Entity 1 will enter into a qualified exchange accommodation agreement ("QEAA") as defined by Rev. Proc. 2000-37 with a taxpayer who will engage in a § 1031 exchange. Pursuant to the QEAA, Entity 1 will acquire from a person unrelated to the taxpayer a 50 percent interest in a partnership whose only asset is real estate. The other 50 percent interest in the partnership is already owned by the taxpayer. Entity 1 will be a partner in the partnership during the period of time that Entity 1 owns the partnership interest. The QEAA states that Entity 1 is acting as the agent of the taxpayer for all purposes other than Federal income tax purposes.
The taxpayer will enter into an exchange agreement with Entity 2, which will act as a "qualified intermediary" within the meaning of § 1.1031(k)-1(g)(4) of the Income Tax Regulations. Entity 2 then will enter into a contract with Entity 1 for the purchase of the partnership interest.
Section 1031(a)(1) generally provides for the deferral of gain or loss on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment. Section 1031(a)(2)(D) precludes the exchange of a partnership interest from § 1031 treatment.
Rev. Proc. 2000-37 provides a safe harbor under § 1031 for an exchange where the taxpayer acquires the replacement property before transferring the relinquished property. Section 4 of Rev. Proc. 2000-37 sets forth certain requirements that must be met in order for an entity to qualify as an EAT, and in order for the agreement between the EAT and the taxpayer in the § 1031 exchange to qualify as a QEAA. Section 4.02(2) of Rev. Proc. 2000-37 provides, in part, that at the time the qualified indicia of ownership of the property is transferred to the EAT, it is the taxpayer's bona fide intent that the property held by the EAT represent replacement property in a § 1031 exchange.
In Rev. Rul. 99-6, 1999-1 C.B. 432, situation 1, A and B are equal partners in the AB partnership. A sold A's entire interest in the AB partnership to B. B's purchase of A's interest in the AB partnership resulted in a termination of the partnership under § 708(b)(1)(A). For purposes of determining the tax consequences to B, AB partnership is deemed to have made a liquidating distribution of all its assets equally to A and B, and following this distribution, B is treated as acquiring the assets deemed to have been distributed to A in liquidation of A's partnership interest. As a result, B holds all the assets formerly held by the AB partnership. Accordingly, B is not treated as acquiring A's partnership interest in the exchange.
The acquisition of the partnership interest by Entity 1, in the facts described above, is not inconsistent with Entity 1's status as an EAT where the remaining partnership interest is already owned by the taxpayer in the § 1031 exchange.
This ruling is directed only to Entity 1. This is not a ruling with respect to any particular partnership, partner, or taxpayer engaged in a § 1031 exchange. Section 6110(k)(3) provides that it may not be used or cited as precedent.