Reference no: EM132875171

The taxpayer, a calendar year corporation, wants to change its company's headquarters, which is currently a 10-story building. The company owns the property without a mortgage.

• The company decides to exchange its existing property for a retail and residential building complex. You assisted the company is structuring the exchange. Both parties used the "middleman" corporation, to whom the properties were initially conveyed. The agreement with the middleman included the requirement that the taxpayer sell its property to the middleman, and then, within 45 days of the initial closing, formally identify which of the two new properties it intended to acquire. The identified property was also sold to the middleman corporation. The corporation would then transfer title to the taxpayer within 180 days after the date of initial closing.
• Unfortunately, the transaction has not proceeded as planned. The taxpayer transferred its property to the middleman, receiving $10,000,000 in cash. The company formally identified the property it intended to acquire. Unfortunately, one week before the 180 days was up, the seller of the property backed out of the arrangement.
• Taxpayer's basis in the ten-story building is $2,000,000.

Question A) Will the company have to report an $8,000,000 gain since they can no longer get a "like-kind" exchange?