This section contains the nature of the case and procedural background.

P was the sole shareholder of the Crosby Corporation, which owned Montebello property. P decided to liquidate Crosby and distribute Montebello to himself. Financing problems meant the wise choice was to dispose of the Montebello property rather than developing it himself. On the day of the Crosby, liquidation P contracted to exchange Montebello with Southern California Savings & Loan (SCS) for other like-kind investment property to be designated. Crosby transferred all its assets, the property, and liabilities to P in a stock redemption. The exchange with SCS took place three months later. P reported no gain on the transaction asserting that the exchange qualified for nonrecognition treatment under I.R.C. § 1031(a). D claimed that P did not hold the property for productive use in trade or investment and thus was not eligible for §1031(a). treatment. The Tax Court agreed with P and D appealed.

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