Code Sec. 1031

 * Sec. 1031 Issues: Exchange of property held for productive use or
   investment.


	This letter responds to your request for a private letter ruling, dated 
May 16, 1997, submitted on behalf of Taxpayer. Taxpayer, a State A limited 
partnership, requests a ruling that the receipt of several parcels of real 
property (each parcel is a "Replacement Property", collectively, the 
parcels are the "Replacement Properties") by an entity owned by Taxpayer 
will be treated as the receipt of real property directly by the Taxpayer 
for purposes of qualifying the receipt of such Replacement Property for 
nonrecognition of gain under section 1031 of the Code.


FACTS

	Taxpayer, a State A limited partnership, uses the accrual method for 
maintaining its accounting books and for preparing its federal income tax 
returns. The Taxpayer's taxable year ends on December 31. The Taxpayer's 
partners are LLC, a State A limited liability company, and GP a general 
partnership organized in State B.

	Taxpayer's business operations consist of the ownership and leasing of 
a single parcel of improved land. The improvements to the land consist of 
a commercial office building and related structures. The land and 
improvements are leased to a single lessee under a long-term lease. 
Collectively, the land and building are referred to as the "Relinquished 
Property".

	The Relinquished Property serves as security for the Taxpayer's 
indebtedness. Under the terms of the indebtedness, Taxpayer is required to 
hold only the Relinquished Property.

	Taxpayer has determined that it is in its partners' best interests to 
dispose of the Relinquished Property. Taxpayer has identified a party 
interested in acquiring the Relinquished Property. Each Replacement 
Property will be subject to indebtedness ("Replacement Indebtedness") 
secured by that Replacement Property. Taxpayer wishes to acquire each 
Replacement Property subject to its Replacement Indebtedness. The terms of 
each Replacement Indebtedness require that, for such indebtedness to be 
taken subject to as part of an exchange, the Replacement Property securing 
such Replacement Indebtedness must be acquired by a single asset entity.

	Taxpayer proposes to achieve its business objectives by engaging in the 
following actions:

	(1) Taxpayer will transfer title to the Relinquished Property directly 
to a qualified intermediary (within the meaning of section 
1.1031(k)-1(g)(4) of the Income Tax Regulations).

	(2) Taxpayer will form a separate entity (a "Replacement Entity") to 
take title to each Replacement Property to be received in the exchange. 
Accordingly, Taxpayer will form one such entity for each of the 
Replacement Properties.

	(3) Each Replacement Entity will receive title to its designated 
Replacement Property directly from the qualified intermediary as part of 
the overall exchange.

	(4) Each Replacement Entity will be a "business entity" that is a 
"domestic eligible entity" within the meaning of section 301.7701-2 and 3 
of the regulations.

	(5) Taxpayer will be the sole owner of the ownership interests in each 
Replacement Entity.

	(6) Each Replacement Entity will either: (i) file a timely and proper 
election to be disregarded as an entity separate from its owner pursuant 
to section 301.7701-3 of the regulations, or (ii) will not file any 
election pursuant to section 301.7701-3(c) regarding its classification 
and will instead rely on the default classification rule for single owner 
entities pursuant section 301.7701-3(b)(1)(ii).

	(7) Each Replacement Entity will hold its Replacement Property either 
for productive use in a trade or business or for investment, in each case, 
within the meaning of section 1031 of the Code.

	(8) Neither Taxpayer nor any Replacement Entity will be a bank as 
defined in section 581 of the Code.

	(9) Taxpayer has represented that the exchange of the Relinquished 
Property for the Replacement Properties will comply with the requirements 
of section 1.1031(k)-1 of the regulations relating to the qualification of 
such exchange for nonrecognition of gain or loss under section 1031(a) of 
the Code.


LAW AND ANALYSIS

	Section 1031(a)(2) of the Code provides that no gain or loss shall be 
recognized on the exchange of property held for productive use in a trade 
or business or for investment if such property is exchanged solely for 
property of like kind which is to be held either for productive use in a 
trade or business or for investment. Section 1031(a)(2) excludes from 
eligibility for nonrecognition treatment any exchange of interests in a 
partnership, stock, or certificates of trust or beneficial interest.

	Section 301.7701-2(c)(2) of the regulations provides that, in general, 
a business entity that has a single owner and is not a corporation (as 
defined in section 301.7701-2(b)) is disregarded as an entity separate 
from its owner for federal tax purposes unless the entity elects to treat 
itself as an association for federal tax purposes. Because each 
Replacement Entity will be disregarded as an entity separate from its 
owner for federal tax purposes, the assets of each Replacement Entity will 
be treated as assets of the Taxpayer.


CONCLUSION
	Taxpayer's receipt of the Replacement Properties by the Replacement 
Entities will be treated as the receipt of real property directly by the 
Taxpayer for purposes of qualifying the receipt of such Replacement 
Property for nonrecognition of gain under section 1031 of the Code.

	Except as specifically ruled above, no opinion is expressed as to the 
federal tax treatment of the above transactions under other provisions of 
the Code and regulations that may be applicable. No opinion is expressed 
as to the tax treatment of any conditions existing at the time of or 
effects resulting from the transaction that are not specifically covered 
by the above ruling. A copy of this letter ruling should be attached to 
the appropriate federal income tax returns for the taxable years in which 
the transactions described herein are consummated.

	This letter ruling is directed only to the taxpayer who requested it. 
Section 6110(j)(3) of the Code provides that it may not be used or cited 
as precedent.

	                               Assistant Chief Counsel
	                               (Income Tax & Accounting)

	                               By ____
	                               David L. Crawford
	                               Branch Chief, Branch 5