## Facts

- Joseph R. Bolker was the sole shareholder of Crosby Corporation, which owned the Montebello real property.
- Bolker planned a corporate liquidation to distribute Montebello to himself; after financing difficulties, he decided to dispose of the property rather than develop it.
- On March 13, 1972, Crosby transferred all assets and liabilities (including Montebello) to Bolker in redemption of all outstanding stock, and the liquidation documents and deed transfer were executed and recorded.
- The same day, Bolker entered into a contract, using Parlex (formed to facilitate the exchange), to exchange Montebello for replacement properties to be designated by Bolker; related agreements coordinated Montebello’s transfer to Southern California Savings & Loan (SCS).
- On June 30, 1972, all steps closed simultaneously: SCS received Montebello and Bolker received three real estate parcels he had designated.
- Bolker reported no gain, claiming nonrecognition under former I.R.C. § 1031(a) as an exchange of property held for investment for like-kind property to be held for investment.
- The Tax Court held the exchange qualified; the Commissioner appealed.

## Issues

1. Whether Montebello was “held for productive use in trade or business or for investment” under former I.R.C. § 1031(a) when Bolker intended to exchange it almost immediately after receiving it in liquidation.
2. Whether the Commissioner could argue on appeal, for the first time, that Montebello was “held primarily for sale” and thus excluded from § 1031(a).

## Decision

- The Ninth Circuit affirmed the Tax Court’s judgment for Bolker.
- The court held Bolker satisfied § 1031(a)’s “held for investment” requirement despite the brief holding period because his plan was to continue his real estate investment through a like-kind exchange.
- The court declined to consider the Commissioner’s “held primarily for sale” theory because it was raised for the first time on appeal.

## Legal Principles

- Section 1031(a) does not impose a minimum holding period; the relevant inquiry is whether the taxpayer’s purpose is to continue an investment in like-kind property rather than to convert the property to cash or personal use.
- Property may qualify as “held for investment” under § 1031(a) even if the taxpayer intends at acquisition to dispose of it promptly through a like-kind exchange.
- Appellate courts generally do not consider issues or legal theories raised for the first time on appeal, particularly when the trial record was not developed with that issue in view.

## Conclusion

A taxpayer can meet § 1031’s holding requirement where property is acquired and quickly exchanged as part of an investment-continuation plan, and an opposing party ordinarily waives a new exclusion theory by failing to raise it in the trial court.


Bolker v. Commissioner, 760 F.2d 1039 (9th Cir. 1985)