Almost 57 years ago, the Department of the Treasury issued final regulations1 making it clear that certain leaseholds in real estate (those with 30-years or more remaining) were eligible for like-kind exchange treatment.2 Nonetheless, the United States Tax Court decided a case in 2013 in which the parties argued, unsuccessfully, that the rules applicable to leasehold interests were merely a “safe harbor.”3 The outcome was quite costly to the taxpayers with $2,215,986 of additional gain recognized on the transaction with $832,347 additional federal income tax owed.4



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