The taxpayer, a calendar-year corporation, wants to change its company's headquarters currently consisting of a ten-story building. The company owns the building outright. The taxpayer has identified some potentially more suitable properties. One of the possible properties is a single-story building on a large, attractive lot. The other property consists of a two-building complex, with retail shops on the ground floor of one building and residential rental property in a portion of the other building.
After further discussions with the client and a review of relevant documents, you discover the following additional facts: Each of the new properties has a fair market value that slightly exceeds that of the current ten-story building. The taxpayer would demolish the single-story building if the company purchases that property. The company would then build a specially designed building on the lot. The sellers of both properties appear to be interested in entering an exchange transaction whereby the company's property would be exchanged for one of the other properties.
a. Do the Treasury regulations provide further guidance in this situation?
b. Do the Treasury regulations help to refine or add to the initial research question?
c. Do the regulations adequately address the research question? If so, what are your conclusions, and on what are they based?