Allen, Joyce, (1982) TC Memo
The Tax Court held that a multi-party exchange using two escrows was a sale, followed by a purchase because neither of the escrows was made subject to the successful completion of the transaction in the other escrow.
Klein, Keith, (1993) TC Memo
The Tax Court held that a multi-party transaction involving an escrow account was a sale followed by a reinvestment, rather than a valid tax-deferred exchange because the Exchanger had unrestricted control over, and thus constructive receipt of, the funds in the escrow account. Although the escrow agreement assigned some of the escrowed funds (from the sale of the Exchanger’s relinquished property) to a third party (the person from whom the Exchanger was acquiring the replacement property), those instructions were made at the Exchanger’s “own behest.” The deal between the Exchanger and the purchaser of his property involved no restrictions on the Exchanger’s control of the sale proceeds that were to be deposited into the escrow account. Thus, at the time that the purchaser deposited the funds in escrow, the Exchanger had control over them.
Florida Industries Investment Corp. (1999) TC Memo
A Corporation intending to perform an exchange failed to prove that it, acting through its president, did not have control over the escrowed sales proceeds, thus the exchange didn’t qualify as a tax-deferred exchange. Although the sales agreement imposed restrictions on the corporation’s access to the escrowed sales proceed until the expiration date of the 180-day period, the escrow agent (also, the corporation’s lawyer) violated the terms of the agreement and permitted the president to control the disbursement of the funds for purposes other than the acquisition of replacement property, such as a “draw” to the president. Also, on several occasions, the agent signed checks to pay off balances due with respect to the acquisition of replacement properties, and amounts in excess of those balances due were not re-deposited in the escrow account.
Maxwell Mark V. U.S. (1988)
A district court held that a multi-party exchange using an escrow was a sale and not a tax-deferred exchange where the Exchanger had the discretion to terminate the escrow before using the exchange proceeds for purchasing the replacement property that was to be transferred back to the Exchanger.
