You currently work at a "Big 4" accounting firm as a staff associate when a senior associate asks for your help in researching a potential issue with one of their clients. They would like you to research the issue and summarize everything in a memo for the file. Below are the set of the facts that they provide to you for the firm's client.

Randall owned an office building (adjusted basis of $250,000) that he has been renting to a group of physicians. During negotiations over a new seven-year lease, the physicians offered to purchase the building for $900,000. Randall accepted the offer with the stipulation that the sale be structured as a delayed 1031 transaction. Consequently, the sales proceeds were paid to a qualified third-party intermediary on the closing date of September 30, 2020.

On October 2, 2020, Randall properly identified an office building that he would like to acquire. Unfortunately, on November 10, 2020, the property Randall selected was withdrawn from the market. Working with the intermediary, on November 12, 2020, Randall identified another office building that meets his requirements. The purchase of this property closed on December 15, 2020, and the title is transferred to Randall.

Randall thinks the transaction should still be treated as a like-kind exchange even though the original office building identified was not acquired. Randall feels that in substance, he has satisfied the 45-day rule since he identified the acquired office building as soon as the negotiations ceased on his first choice.

The senior associate is concerned that the IRS may challenge this 1031 deferred exchange upon an audit so they want to make sure the file contains the necessary support of your conclusion regarding whether or not Randall's transaction qualifies as a 1031 deferred exchange. Use Checkpoint to conduct your research and please reference your research in the memo. Remember to try and use more primary authority references rather than secondary authority to support your conclusion. Use a Memo format.