Bolker v. Commissioner

Joseph Bolker (plaintiff) was sole shareholder of Crosby Corporation, which owned property called Montebello. Anticipating that he would want to take and develop Montebello personally, Bolker liquidated Crosby and had Montebello transferred to himself. Facing financial difficulty, he then arranged to exchange Montebello for other property, forming Parlex to facilitate the exchange. About three months after taking Montebello, Parlex exchanged it for a bank's real estate, and Bolker took title. He reported no gain under the nonrecognition provision of section 1031(a). The Commissioner (defendant) determined the exchange did not qualify and issued deficiency notices. The Tax Court ruled for Bolker, and the Commissioner appealed.

Whether a like-kind exchange in which each asset was held for business or investment purposes before the exchange qualifies for tax nonrecognition under section 1031(a).