shifting basis via incestuous 1031s

For completeness of research, also note Rev Rul 2002-83, summarized in PLR 202053007 this way:

In Rev.Rul. 2002-83, 2002-2 C.B. 927, a taxpayer transferred low-basis property to an unrelated buyer through a qualified intermediary (QI) and acquired high-basis replacement property from a related person, through the QI, with the proceeds of the sale of the relinquished property. The taxpayer and the related person structured the transaction to cash out of their investment in the low-basis relinquished property without recognizing gain. The related person had $0 of realized gain on its sale of the high-basis replacement property and the taxpayer used § 1031 to defer the realized gain on the disposition of the low-basis property. In analyzing these facts under § 1031(f)(4), the Service quoted the above legislative history for the proposition that § 1031(f)(4) is intended to apply to situations in which an unrelated person, such as a QI, is used to effectuate a like-kind exchange between related parties of high-basis property for low basis property in anticipation of the sale of the low-basis property. In these situations, had the taxpayer engaged in a direct exchange with the related person, without the use of an unrelated person such as QI, followed by an immediate sale by the related person of the property formerly owned by the taxpayer, § 1031(f)(1) would apply and gain recognition would be triggered in the year of the subsequent disposition by the related person. The Service concluded that the transaction described in the revenue ruling was structured to avoid the purposes of § 1031(f) and, therefore, the taxpayer must recognize the gain realized on its transfer of the relinquished property.

, and the PLR itself, which distinguished the facts of the Rev Rul and concluded favorably to the taxpayer. Teruya et al were not cited

In these situations, had the taxpayer engaged in a direct exchange with the related person, without the use of an unrelated person such as QI, followed by an immediate sale by the related person of the property formerly owned by the taxpayer, § 1031(f)(1) would apply and gain recognition would be triggered in the year of the subsequent disposition by the related person.

This is different than the transaction in the OP as it includes a related party cashing out.

I was an MIT trained economist before deciding to become a tax lawyer. I'm 73 with 6 stents. So I just enjoy life most of the time. I'm extreme. I take a fact pattern, figure out a way to cut government revenues and then get back to what the client was attempting to do.
I want to live on the edge -- and that can be both interesting and unnerving. So be it.

You are living on the edge ... with 6 stents and being 73. And you get off on writing posts that upset people ... some people just do, which is why they're writing their posts. As a MIT trained economist turned tax lawyer, you are not elevating people's opinion of tax lawyers with a MIT background.

You're not getting a client anything back. You're not preparing returns, as you said so yourself, which also includes preparing returns which are based on your own hypothetical ideas of how tax law should work. You're getting people sued by taxing agencies, including the tax professional who prepares a return based on your hypothetical ideas.

As tax preparers AND tax planners (and it appears you cannot reconcile that most of us are heavily involved in both, without creating asinine gray area concepts that violate black and white law), we do not have the luxury of operating in the gray area. If we wish to hold our credentials--and I am certain all of us with a still functional brain do--then it is what is black and white per the tax code. Can you find ways to gain tax benefit for clients based strictly on what the code says? Absolutely, and THAT, my idiotic and very ballsy friend, is how we provide value to clients. It is not by believing the tax code should be interpreted one way while exposing not only ourselves but our clients to significant tax and legal ramifications.

Snakes may find an opening, but it is ultimately closed and something dies in the process. Sometimes it is the snake. Sometimes it is their unsuspecting (or stupid) prey. Other times, it is both.

You appear to be at death's door, do not actively practice from what you have communicated, and it appears you could not care less if your concepts have ramifications or not. But the problem, too, is you think you are "educating" people you perceive as lesser than you from an intellectual standpoint, yet we are the ones that will continue to outlive you, and ultimately outperform you with clients because we will not be landing our butts in jail or prison with absurdly creative and illegal tax strategies.

Rough crowd. We are supposed to have standards of behavior here. Why is it ok to pile on like this? Idiotic? Snake, stupid, death's door, we will outlive you, and that is only the post above this one. There are more. I know we are all under pressure right now, but is this really necessary? Is this who we are as a community?

I haven't read all of his posts, but the ones I have read have not included these sorts of direct insults. Also, he said sorry.

Why is it ok to pile on like this?

Totally agree. It’s not necessary. Further, there’s nothing wrong with people putting forth ideas. Respond to the technical merits of the idea(s). Only then will we know if the purported tax savings even exist to begin with.

Many of you are taking his claims at face value, like there are massive tax savings from his ideas. And then you get all bent out of shape because these perceived tax savings originate from an off-the-wall idea, concluding that the tax savings are ill-gotten, unethically earned or borderline fraudulent.

Not many of you have taken the opportunity to evaulate his ideas from top to bottom, step by step, using actualy dollar figures.

In some ways, I don’t blame you. Since he gives sparse details (my big beef) you can’t really evaluate the merits…unless you wish to engage in a prolonged analysis all on your own, involving numerous assumptions, or engage in a prolonged back-and-forth.

Take his idea about a term interest involving land. That’s not a new strategy. But he failed to consider the low basis the remainder purchaser would have in the case of an up-front split interest purchase.

And his idea about a CUB. That’s not a new idea either. If you can convince your Key Employee to pay an inflated purchase price, more power to you. Price and value are two different things.

My secondary beef is that it gets annoying when one has to keep repeating him or herself. I don’t know how many times we (me and Wiles) had to say that the vesting of a non-qualified option isn’t a taxable event (for example). In any case, I stuck with that thread for the benefit of Wiles, given that he was dealing with a significant transaction and a significant issue.

Jeff, I really do appreciate you sticking with that other thread. I would have (and did) give up long before you closed it out.