In a late 2006 private letter ruling,1 the Internal Revenue Service took the position that, in a like-kind exchange of real property among related parties, there was no “basis shifting” because of the effect of a recent death on the income tax basis of the properties.2 Thus, the avoidance of federal income tax was not a principal purpose of the exchange or the subsequent disposition of one of the tracts of real property3 and the disposition of that tract within the two year period after the exchange did not result in recognition of gain.4 To the extent the ruling represents solid authority, it provides a modicum of comfort for those planning a like-kind exchange involving related parties where cashing out is anticipated by one or more of the parties.5



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