Citations
- 897 F. Supp. 2d 1122
Full opinion text
Table of Contents
Topic Page No.
I. Introduction .........................................................1128
II.The Basic Requirements for a Deferred, Like-Kind Exchange Under Section 1031........................................................1130
III. The Plaintiffs, Defendants, and Other, Non-Party Players..............1139
A. Plaintiffs ........................................................1139
B. The Wilmer & Lee Defendants.....................................1141
C. The Baswell-Guthrie Defendants ..................................1141
D. The McDermott Defendants .......................................1141
1. The resolution and dismissal of plaintiffs’ claims against the McDermott Defendants......................................1142
E. Non-Parties Involved in Some Transactions.........................1142
IV. The Replacement Property Acquisitions ...............................1144
1. The Moquin transaction.......................................1145
2. The Fountain transaction......................................1147
A. The Moquin and Fountain Acquisitions.............................1147
B. The Corporate Drive Acquisition...................................1148
C. The Old Madison Pike Acquisition.................................1149
D. The Quality Circle Acquisition.....................................1150
V. Acquisitions Closed by the Wilmer & Lee Defendants...................1151
A. Acquisition of the “Moquin Drive” and “Fountain” Properties.......1151
1. Samuel Givhan’s involvement..................................1153
2. The “Ireland conference call”..................................1153
3. WaMu forwards funds and forms to Givhan.....................1154
B. Acquisition of the “Corporate Drive” Property......................1157
C. The Role of California Attorney Jeffrey Weiss.......................1159
D. Reformation of Titles to the Properties Closed by Givhan............1160
E. The Issue of the $50,000 Check.....................................1161
VI. Acquisitions Closed by the Baswell-Guthrie Defendants................1161
A. Lead-Up to Old Madison Pike and Quality Circle Acquisitions .......1161
B. Old Madison Pike (a/k/a “Tech Point”).............................1162
C. Quality Circle....................................................1165
D. Possible Conflict of Interest.......................................1169
E. Dispute With McDermott..........................................1169
VII.Choice of Governing Law.............................................1170
A. The Public Policy Exception to the Rule of Lex Loci Delicti..........1172
1. The Alabama Legal Services Liability Act.......................1172
2. Plaintiffs’ argument that non-clients can assert common-law claims against Alabama attorneys............................1174
a. Cunningham v. Langston, Frazer, Sweet & Freese, P.A., 727 So.2d 800 (Ala.1999)...................................1174
b. Fogarty v. Parker, Poe, Adams & Bernstein, L.L.P., 961 So.2d 784 (Ala.2006)......................'................1174
c. Smith v. Math, 984 So.2d 1179 (Ala.Civ.App.2007)..............1175
d. Line v. Ventura, 38 So.3d 1 (Ala.2009)........................1176
3. Analysis of the cases relied upon by plaintiffs, and their application to public policy...................................1178
VIII.Inconsistencies Among the Allegations of the Complaint, the Uncontested Facts, and Arguments in Briefs..........................1180
A. Claims Against the Wilmer & Lee Defendants.......................1180
1.Variance between the factual allegations and Count 3 of the complaint, on the one hand, and uncontested facts on the other.......................................................1181
B. Claims Against the Baswell-Guthrie Defendants....................1182
C. The Omissions of Counsel.........................................1182
IX. Analysis of the Claims Brought Against the Wilmer & Lee Defendants____1183
A. Alabama Securities Violation (Count 2) ............................1183
1. Beyond Foster................................................1185
a. CFT Seaside Investment Limited Partnership v. Hammet, 868 F.Supp. 836 (D.S.C.1994) ..............................1185
b. Ward v. Bullís, 748 N.W.2d 397 (N.D.2008)....................1186
c. San Francisco Residence Club, Inc., et al. v. Park Tower, LLC, et al., Civil Action No. 08-1423-NE-AKK (N.D.AIa. Jan. 12, 2012)............................................1187
2. Application of the ratio decidendi of the preceding decisions to the issues raised in the present action......................1188
B. Claims Asserted Against the Wilmer & Lee Defendants Under the Alabama Legal Services Liability Act (Count 3)...................1190
1. Plaintiffs’ proposed expert witness .............................1191
a. Crockett’s qualifications...................................1191
b. Analysis..................................................1192
C. The Claim for Thomas O’Shea’s $50,000 Check (Count 3).............1195
X. Analysis of the Claims Brought Against the Baswell-Guthrie Defendants.........................................................1195
A. Existence of an Attorney-Client Relationship Between Plaintiffs and Baswell-Guthrie............................................1196
B. The Old Madison Pike Acquisition.................................1197
1. Expert testimony on the standard of care, and the “common knowledge and experience” exception.........................1197
2. Damages.....................................................1199
C. The Quality Circle Acquisition.....................................1200
1. Gilmour v. Gates, McDonald & Co., 382 F.3d 1312 (11th Cir. 2004).......................................................1200
2. Davis v. Coca-Cola Bottling Co. Consol., 516 F.3d 955 (11th Cir.2008)....................................................1201
3. Application...................................................1202
D. Escrow Liability of One Source Title & Escrow L.L.C. (Count 11).... 1204
XI.Analysis of Counterclaims Asserted by the Baswell-Guthrie Defendants.........................................................1205
A. Motion for Partial Summary Judgment: Fraud Counterclaim........1205
B. Motion for Partial Summary Judgment: Breach of Contract Counterclaim...................................................1209
C. Motion to Dismiss the Counterclaim...............................1210
1. Standard of review............................................1210
2. Discussion....................................................1212
XII. Miscellaneous Motions...............................................1214
A. Plaintiffs’ Motion to Compel ......................................1214
B. The Baswell-Guthrie Defendants’ Motion to Quash Subpoena........1217
C. Defendants’ Joint Motion to Compel ...............................1217
1. Attorney communications........•..............................1217
a. Factual background.......................................1217
b. Waiver of the attorney-client privilege ......................1217
c. Application of the privilege in this case .....................1219
2. Attorneys’ fees................................................1222
D. The Baswell-Guthrie Defendants’ Motion to Strike..................1223
XIII. Conclusions..........................................................1225
A. Choice of Law and Counts 4,11, and 10.............................1225
1. Count 4 ......................................................1225
2. Count 11 .....................................................1226
3. Count 10 .....................................................1226
B. Remaining Counts................................................1226
1. Count 2 ......................................................1226
2. Count 3 ......................................................1226
a. ALSLA and the Wilmer & Lee defendants...................1227
b. ALSLA and the Baswell-Guthrie defendants.................1227
C. The Baswell-Guthrie Defendants’ Counterclaims....................1228
1. Counterclaim count 1: Fraud..................................1228
2. Counterclaim count 2: Breach of contract ......................1228
D. The Miscellaneous Discovery Motions..............................1229
I. INTRODUCTION
This action grew out of a series of real-estate acquisitions that occurred in Huntsville, Alabama during 2007. Section 1031 of the Internal Revenue Code — a provision that allows a property owner to defer taxation of profits generated from the exchange of property held for productive use in a trade or business or for investment in property of a “like kind” — lies at the heart of the controversy. See 26 U.S.C. § 1031(a)(1). The plaintiffs intended to effect transactions under that provision by selling income-producing properties located in California and Mississippi, and then utilize the profits derived from those transactions to purchase replacement commercial properties in Huntsville, Alabama.
This action — as well as three similar cases assigned to other judges on this same court, and a spate of state-court suits spawned by the plaintiffs’ investments in Huntsville real estate — arose when the plaintiffs’ acquisitions of Huntsville real estate allegedly were not structured in a manner that made the investments eligible for favorable tax treatment under Section 1031. The failure to do so exposed plaintiffs to potentially significant, and negative, tax consequences — an outcome that they, nevertheless, avoided by falsely stating on their respective 2007 income tax returns that each of the acquisitions qualified for Section 1031 treatment. Plaintiffs compounded their misrepresentations to the Internal Revenue Service by commencing this action, in which even their Second Amended Complaint — that is, their third attempt to plead claims upon which relief arguably might be granted— continues to perpetuate a confusing muddle of facts, claims, and remedies that, at times, can only be described as bewildering. Regrettably, plaintiffs’ attorneys have provided scant assistance to this court’s comprehension of difficult issues by way of briefs or oral argument. Perhaps that was intentional: a tactical decision that scattering claims, contentions, and defenses might be more efficacious than targeted shots. If so, that “does great disservice to the administration of civil justice.”
For such reasons, the following opinion represents this court’s best effort at hacking a path through the tangled allegations, arguments, and evidentiary materials presented in connection with the disposition of ten pending motions, and an attempt to determine whether some harmonizing themes may be discerned among the admitted and undisputed facts. The discussion will begin, however, as it must, with a summary of the basic requirements for structuring a deferred, like-kind exchange under Section 1031.
II. THE BASIC REQUIREMENTS FOR A DEFERRED, LIKE-KIND EXCHANGE UNDER SECTION 1031
Normally, when real property is sold, the owner must recognize either a gain or loss If it is a gain, the amount is subject to taxation. If the property has a low basis, and the gain from the sale will be high, the taxpayer often will attempt to structure the transaction in a manner that will minimize his tax liability. Internal Revenue Code Section 1031 is the primary means of accomplishing that objective. The primary clause of that statute provides that:
No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.
26 U.S.C. § 1031(a)(1). Because Section 1031 provides an exception to the general rule found in I.R.C. § 1001(c), requiring “recognition” (ie., taxation) of the entire amount of the gain on the sale of property, the statutory and regulatory requirements for such transactions are complex, nuanced, and strict. Some of those requirements are fundamental to an understanding of the transactions at issue in this case, and they, along with relevant terms, are discussed below.
Exchanger (sometimes referred to as an “Exehangor”): An individual or entity performing an exchange under Section 1031.
Relinquished property: The property an exchanger transfers in a Section 1031 exchange.
Replacement property: The property an exchanger identifies and ultimately receives in a Section 1031 exchange.
Exchange requirement: Treasury Regulations provide that, “[o]rdinarily, to constitute an exchange, the transaction must be a reciprocal transfer of property, as distinguished from a transfer for a money consideration only.” In other words, to satisfy the “exchange” requirement of Section 1031, the transaction must involve a transfer of property by the exchanger and the receipt of property by the exchanger. The transactions cannot be transfers of property for the receipt of money.
“Like-kind” property requirements: The relinquished and replacement properties must be of a “like-kind.” The term “like-kind” is not specifically defined in the Internal Revenue Code. Section 1031 provides only that the property subject to “exchange” must be “property held for productive use in a trade or business or for investment.” Treasury Regulations provide some, but not a great deal of, guidance when stating that the term refers to “the nature or character of the property and not to its grade or quality.” For example, unimproved real estate is deemed to be of a “like-kind” with improved real property since the existence of the improvements relates only to the grade or quality of the property, and not to its nature or character.
Like-kind ownership interests — The nature of the exchanger’s ownership interests in the exchanged properties also are subject to the “like-kind” requirement. In other words, title to the replacement property must be vested in the same persons or entities, and with the same forms of ownership interests — e.g., “tenants in common,” “joint tenants with right of survivor-ship” — as was the case with the relinquished property. Even so, the relative percentage of a taxpayer-exchanger’s ownership interest in a replacement property does not have to be equal to the exchanger’s ownership percentage in the relinquished property; instead, it can be either greater or less, but the nature of the ownership interest must be the same. For example, if an exchanger owned a 25% interest in a relinquished property as a tenant in common with two other persons or entities, the exchanger could use the proceeds from the sale of the relinquished property to acquire any other fractional proportion of a tenancy in common interest in the replacement property. The key factors in this example are that the exchanger owned an undivided interest as a tenant in common in both the relinquished property and the replacement property.
The exchanger also must be “on the title” of both the relinquished and replacement properties. That is, the taxpayer owning an interest in real property that is to be exchanged under Section 1031 — and regardless of whether the taxpayer is an individual, a corporation, limited liability company, or some other entity — must be “on the title” to both the relinquished and replacement properties. For example, if a husband and wife held fee-simple title to a relinquished property as tenants in common, then title to the replacement property must vest in both spouses in the same form of ownership as was the case with the relinquished property. Similarly, a corporation, partnership, limited liability company, trust, or any other entity holding an ownership interest in the relinquished property must be “on the title” of the replacement property.
It follows, therefore, that an exchanger who sold his, her, or its share in a relinquished property in which the nature of the exchanger’s title was as a tenant in common, and then purchased a membership in a multi-member, limited liability company (“L.L.C.”) that acquired title to a replacement property, would not be entitled to defer recognition of the taxable gain from the sale of the relinquished property — even if the exchanger’s share in the L.L.C. was equal to the share of the title the exchanger had possessed in the relinquished property under a tenancy in common arrangement. The key factor in this example is that the exchanger would not be “on the title” of the replacement property owned by the L.L.C.; instead, title would be vested in the L.L.C., as opposed to the individual members of the L.L.C. For that reason, the taxpayer-exchanger could not claim that he, she, or it had received “like-kind” property in the exchange.
The requirement for an exchanger to be “on the title” of the replacement property lies at the center of all the claims asserted in the present action. The plaintiffs contend that defendants failed to structure the replacement property acquisitions at issue in compliance with the requirements for deferred tax treatment under Section 1031. The intended replacement properties were purchased by limited liability companies, rather than by the plaintiff-exchangers. Plaintiffs allege that the remaining defendants — i.e., the Wilmer & Lee Defendants and the Baswell-Guthrie Defendants — committed tortious acts in the process of structuring the transactions.
“Safe harbors”: As a practical matter, a taxpayer rarely engages in a transaction in which he and another party literally exchange the titles to relinquished and replacement properties on the same day, back-to-back. Instead, almost all Section 1031 exchanges are non-simultaneous: that is, in tax parlance, “deferred” exchanges. Treasury Regulations define a deferred exchange as one
in which, pursuant to an agreement, the taxpayer transfers property held for productive use in a trade or business or for investment (the “relinquished property”) and subsequently receives property to be held either for productive use in a trade or business or for investment (the “replacement property”).
26 C.F.R. § 1.1031(k)-l(a). That is what occurred in each transaction at issue in the present controversy: the plaintiffs’ acquisition of replacement, income-producing properties occurred several months after the dates on which they had closed on the sales of their relinquished properties.
Significantly, however, Treasury Regulations stipulate that, “[i]n order to constitute a deferred exchange, the transaction must be an exchange (i.e., a transfer of property for property, as distinguished from a transfer of property for money).” Id. (emphasis supplied). Placing that regulatory requirement next to the observation that taxpayers almost never engage in transactions in which they and another party exchange properties with each other on the same day begs a question: How can a taxpayer structure a deferred exchange that still qualifies for favorable tax treatment under Section 1031? The answer lies in a legal fiction: the use of one of the four, so-called “safe harbors” sanctioned by Treasury Regulations. By doing so, the taxpayer-exchanger will not be deemed to be in actual or constructive receipt of money or other property derived from his or her disposition of a relinquished property. One such “safe harbor,” the kind at issue in this case, is discussed below.
Qualified intermediary: A qualified intermediary is a person or entity who (or which) “[e]nters into a written agreement with the taxpayer (the ‘exchange agreement’) and, as required by the exchange agreement, [i] acquires the relinquished property from the taxpayer, [ii] transfers the relinquished property, [Hi] acquires the replacement property, and [m] transfers the replacement property to the taxpayer.” 26 C.F.R. § 1.1031(k)-1(g)(4)(iii)(B) (emphasis and alterations supplied). In other words, both the relinquished and replacement properties must pass through the qualified intermediary.
This safe harbor provides that a qualified intermediary is not treated as the agent of the taxpayer-exchanger for the purposes of determining whether the taxpayer has actually or constructively received money from disposition of the “relinquished property” when that compensation is paid to and held by the qualified intermediary.
In the case of a taxpayer’s transfer of relinquished property involving a qualified intermediary, the qualified intermediary is not considered the agent of the taxpayer for purposes of section 1031(a). In such a case, the taxpayer’s transfer of relinquished property and subsequent receipt of like-kind replacement property is treated as an exchange, and the determination of whether the taxpayer is in actual or constructive receipt of money or other property before the taxpayer actually receives like-kind replacement property is made as if the qualified intermediary is not the agent of the taxpayer.
26 C.F.R. § 1.1031(k)-l(g)(4)(i). Stated differently, in order to preserve the legal fiction of an “exchange,” the exchanger cannot directly receive money when transferring the relinquished property to the qualified intermediary for sale. Instead, the qualified intermediary holds the funds derived from the sale of the relinquished property until the closing on the acquisition of the replacement property. At that time, the qualified intermediary delivers to the seller of the replacement property the funds used to purchase that property, and then transfers to the taxpayer-exchanger title to the replacement property. Such transactions have been approved as a valid means of effecting an “exchange” of property for the purposes of favorable tax treatment under Section 1031. See, e.g., Alderson v. Comm’r of Internal Revenue, 317 F.2d 790 (9th Cir.1963).
Requirements for “qualified intermediaries”: The following requirements must be satisfied in order for the “qualified intermediary safe harbor” to apply.
The inclusion of the “(g)(6) restrictions”—
The agreement between the taxpayer-exchanger and qualified intermediary must contain the restrictions specified in Treasury Regulation § 1.1031(k)-l(g)(6).
(6) Additional restrictions on safe harbors under paragraphs (g)(3) through (g)(5). (i) An agreement limits a taxpayer’s rights as provided in this paragraph (g)(6) only if the agreement provides that the taxpayer has no rights, except as provided in paragraph (g)(6)(n) and (g)(6)(m) of this section, to receive, pledge, borrow, or otherwise obtain the benefits of money or other property before the end of the exchange period.
(ii) The agreement may provide that if the taxpayer has not identified replacement property by the end of the identification period, the taxpayer may have rights to receive, pledge, borrow, or otherwise obtain the benefits of money or other property at any time after the end of the identification period.
(iii) The agreement may provide that if the taxpayer has identified replacement property, the taxpayer may have rights to receive, pledge, borrow, or otherwise obtain the benefits of money or other property upon or after—
(A) The receipt by the taxpayer of all of the replacement property to which the taxpayer is entitled under the exchange agreement, or
(B) The occurrence after the end of the identification period of a material and substantial contingency that—
(1) Relates to the deferred exchange,
(2) Is provided for in writing, and
(3) Is beyond the control of the taxpayer and of any disqualified person (as defined in paragraph (k) of this section), other than the person obligated to transfer the replacement property to the taxpayer.
26 C.F.R. § 1.1031(k)-l(g)(6) (emphasis in original).
The qualification requirement—
Second, the qualified intermediary must be a person or entity who (or which) is not either the taxpayer-exchanger or a “disqualified person” as defined in Treasury Regulation § 1.1031(k)-1(k). See 26 C.F.R. § 1.1031(k)-1(g)(4)(iii)(A).
Requirement that both transfers pass through the qualified intermediary—
The exchange agreement must require the qualified intermediary to: (1) acquire the relinquished property from the taxpayer-exchanger; (2) transfer the title to the relinquished property to the purchaser; (3) acquire the replacement property from the seller; and (4) transfer title to the replacement property to the taxpayer-exchanger. In other words, both the relinquished property and replacement property must pass through the qualified intermediary.
The definition of “transfer”—
When determining whether property has been “transferred through” the qualified intermediary, a modified version of the usual Internal Revenue Service definition of the term “transfer” is employed: that is, property is deemed to have been “transferred through” a qualified intermediary if the qualified intermediary acquires or transfers title to the property. See 26 C.F.R. § 1.1031(k)-1(g)(4)(iv).
The terms of the exchange agreement—
The qualified intermediary is treated as having entered into an exchange agreement if the rights of a party to the agreement are assigned to the intermediary, and, all parties to the agreement are notified in writing of the assignment on or before the relevant transfer of property. See 26 C.F.R. § 1.1031 (k)-1 (g)(4) (v). Thus, the taxpayer-exchanger may enter into an agreement with the purchaser of the relinquished property and satisfy this requirement by assigning his rights in the contract to the qualified intermediary. In like manner, the taxpayer-exchanger may enter into an agreement to purchase a replacement property (or properties) and satisfy this requirement by assigning his rights under that contract to the qualified intermediary.
Timing requirements for deferred exchanges: Internal Revenue Code Section 1031(a)(3) imposes three strict time requirements for completion of a deferred exchange. The time period for each requirement begins on the day after the exchanger transfers the relinquished property and ends at midnight on the last day of the applicable time period.
Moreover, if — as part of the same deferred exchange — the exchanger sells more than one relinquished property, and the relinquished properties are transferred on different dates, the times periods discussed below begin running on the earliest date on which any of the properties is sold.
The b5-day identification period—
The first time restriction for a deferred exchange is the requirement that a taxpayer either close on the acquisition of a replacement property, or identify the potential replacement property, within 45 days from the date of the sale, transfer, or other disposition of the relinquished property. The day rule is hard and fast, with no forgiveness for weekends or holidays.
This requirement is satisfied if the replacement property is acquired before 45 days have expired; otherwise, the identification of the replacement property must be incorporated into a written document (“the identification notice”), signed by the taxpayer-exchanger, and delivered to the qualified intermediary. The “identification notice” must contain an unambiguous description of the replacement property, including, in the ease of real property, the legal description and street address (or a distinguishable name). More than one potential replacement property can be identified. These requirements are encapsulated in the following Treasury Regulations:
Replacement property is identified only if it is designated as replacement property in a written document signed by the taxpayer and hand delivered, mailed, telecopied, or otherwise sent before the end of the identification period to either—
(i) The person obligated to transfer the replacement property to the taxpayer ...; or
(ii) Any other person involved in the exchange other than the taxpayer or a disqualified person (as defined in paragraph (k) of this section).
Examples of persons involved in the exchange include any of the parties to the exchange, an intermediary, an escrow agent, and a title company. An identification of replacement property made in a written agreement for the exchange of properties signed by all parties thereto before the end of the identification period will be treated as satisfying the requirements of this paragraph (c)(2).
(3) Description of replacement property. Replacement property is identified only if it is unambiguously described in the written document or agreement. Real property generally is unambiguously described if it is described by a legal description, street address, or distinguishable name (e.g., the Mayfair Apartment Building). Personal property generally is unambiguously described if it is described by a specific description of the particular type of property. For example, a truck generally is unambiguously described if it is described by a specific make, model, and year.
(4) Alternative and multiple properties. (i) The taxpayer may identify more than one replacement property. Regardless of the number of relinquished properties transferred by the taxpayer as part of the same deferred exchange, the maximum number of replacement properties that the taxpayer may identify is—
(A) Three properties without regard to the fair market values of the properties (the “3-property rule”), or
(B) Any number of properties as long as their aggregate fair market value as of the end of the identification period does not exceed 200 percent of the aggregate fair market value of all the relinquished properties as of the date the relinquished properties were transferred by the taxpayer (the “200-percent rule”).
26 C.F.R. § 1.1031(k)-1(c)(2)-(4)(i) (emphasis in original).
The 180-day, or due-date of income-tax return, exchange period—
Once a replacement property has been identified, it must be acquired and the exchange completed no later than the date of the occurrence of the first of the following events: (a) 180 days after the sale or transfer of the relinquished property; or (b) the due date of the taxpayer’s income tax return, including extensions, for the tax year in which the relinquished property was sold or transferred — whichever event first occurs. The 180 day requirement is also strict: it does not mean six months, but 180 consecutive days, with no forgiveness for weekends or holidays.
1031 Tax Savings Example: The following hypothetical demonstrates how a
Facts related to the Relinquished Property
$500,000 • Original Purchase Price
25.000 • Capital Improvements Made
100,000 • Depreciation Deducted
1,000,000 • Anticipated Sale Price
80.000 • Sale Related Expenses
Determining the Basis
Original Purchase Price $500,000
Plus Capital Improvements + 25,000
• Subtotal 525,000
Less Depreciation - 100,000
• Adjusted Basis $425,000
Determining the Gain
Sale Price $1,000,000
Less Sale Related Expenses (closing costs) - 80,000
Net Sale Price $920,000
Less Adjusted Basis - 425,000
Realized Gain $495,000
Determining the Estimated Tax
Depreciation Recapture
($100,000 x 25%) 25,000
Capital Gain (15% x $395,000) 59,250
Estimated Federal Taxes Due $84,250
In this example, if the taxpayer should decide not to pursue a Section 1031 exchange, the taxable gain would be $495,000, and the Federal capital gain tax liability would be $84,250, plus any state tax liability. By acquiring “like-kind” replacement property equal to or greater than the net sales price of $920,000, however, and reinvesting all of the proceeds of sale, the entire gain can be deferred and no taxes will be due for the tax year in which the relinquished property was sold. taxpayer might evaluate whether to exchange a rental property for a replacement investment property by estimating the potential Federal capital gain tax liability (15-25%).
III. THE PLAINTIFFS, DEFENDANTS, AND OTHER, NON-PARTY PLAYERS
A. Plaintiffs
Thomas O’Shea is a California citizen, over the age of 65 years, and the husband of Anne Donahue O’Shea. He has extensive experience in real estate investments, including the management of a real estate portfolio that stretches across nine states and is valued at more than $14,000,000. He has participated in more than thirty like-kind exchanges, and he identified his occupation as “real estate” on his 2007 joint income tax return.
Anne Donahue O’Shea is the wife of Thomas O’Shea and an attorney licensed to practice law in the State of California, where she was a state prosecutor for some thirteen years. She has been involved in more than twenty like-kind exchanges. She is the sister of Kate and Kevin Donahue. Like her husband, Anne O’Shea’s occupation was identified on the couple’s 2007 joint income tax return as “real estate.”
The Trust of Thomas and Anne O’Shea, sometimes referred to as “the O’Shea Trust,” is a California revocable living trust. The sole trustees are Thomas and Anne Donahue O’Shea.
Kate Donahue is a California citizen, and the sister of Anne Donahue O’Shea and Kevin Donahue. She relies on real estate investments as her primary source of income, and has been involved in at least ten like-kind exchanges.
San Francisco Residence Club, Inc. is a closely-held California corporation. There are four shareholders and Directors: Anne Donahue O’Shea; Kate Donahue; Kevin Donahue; and Gwen Donahue. Gwen Donahue is the mother of Anne, Kate, Kevin, and Kim Donahue. Kim Donahue Welch formerly was a shareholder, but relinquished her stock at the time of her divorce (presumably, to keep the shares out of the hands of her former husband). She is no longer involved in the corporation or this case. Kevin Donahue is the President of the corporation, and Kate Donahue is the Secretary.
KKA CAS, L.L.C. is an Alabama limited liability company, the members of which are Kate Donahue, Kevin Donahue, and Anne O’Shea. The acronym “KKA” is formed from the first letter of each member’s given name. “CAS” refers to the main tenant in one of the Huntsville commercial properties involved in this action.
TAK Tech Point, L.L.C. is another Alabama limited liability company, the members of which are Thomas O’Shea, Anne O’Shea, and Kate Donahue. Again, the acronym “TAK” is formed from the first letter of each member’s given name. “Tech Point” references the seller of the property located at 7027 Old Madison Pike in Huntsville’s Cummings Research Park West.
B. Wilmer & Lee Defendants
Samuel Givhan is an attorney licensed to practice law in the State of Alabama. He is a shareholder in the Huntsville law firm known as “Wilmer & Lee, P.A.” Givhan and his firm are sometimes referred to by the parties, and also this court, as “the Wilmer & Lee Defendants.”
C. Baswell-Guthrie Defendants
Cheryl Baswell-Guthrie is an attorney who, at the time of the events on which this action is based, was licensed to practice law in Alabama. She also then was the sole member of both Baswell-Guthrie, P.C., and One Source Title & Escrow, L.L.C., an Alabama limited liability company. Over the course of her legal career, Ms. Baswell-Guthrie was involved in over fifty like-kind exchanges. Her license to practice law was suspended by the Alabama State Bar on September 16, 2011, following her arrest on a warrant obtained by the Securities and Exchange Commission and charging her with the offense of Theft of Property in the First Degree. She subsequently was placed on “disability inactive” status and, at least as late as July 23, 2012, remained in that status. Her present whereabouts are unknown to this court. Her only contact with the attorneys defending the claims asserted against her apparently is by means of infrequent email transmissions.
D.McDermott Defendants
Scott McDermott, Roy Claytor, and William Chapman are Alabama citizens, real estate professionals, and, on the dates leading up to the commencement of this action, were associates of one another. Highlands Management, L.L.C. is an Alabama limited liability company, the members of which were the three individuals just named. Claytor-Phillips, L.L.C. was an Alabama limited liability company, the members of which were Scott McDermott, Roy Claytor, and Estell Phillips. Huntsville Commercial Brokerage, L.L.C. is an Alabama limited liability company, of which William Chapman is the sole member. The individual defendants named above, together with the limited liability companies controlled by them, will be collectively referred to in this opinion as “the McDermott Defendants.”
1. The resolution and dismissal of plaintiffs’ claims against the McDermott Defendants
In their initial investigation into Huntsville real estate, plaintiffs contacted Scott McDermott, Roy Claytor, and William Chapman — all of whom represented to plaintiffs that they were qualified real estate professionals with experience in arranging Section 1081 like-kind exchanges. Plaintiffs alleged that those representations were false, and that McDermott, Claytor, and Chapman conspired to defraud them.
The McDermott Defendants were named in eight of the twelve counts of the plaintiffs’ Second Amended Complaint. Those defendants are not the focus of the motions addressed in this opinion, however. Rather, this court previously granted a motion to compel arbitration that had been filed by some of the McDermott Defendants, and ordered plaintiffs and those defendants to proceed to arbitration. William Chapman was dismissed from the case on October 22, 2010. The parties filed a notice with the court on May 17, 2011, stating that the claims against the remaining McDermott Defendants had settled. Accordingly, plaintiffs’ claims against those defendants were dismissed.
Thus — and even though the McDermott Defendants, especially Scott McDermott himself, are at the center of the web of events forming the basis of the plaintiffs’ remaining claims against all other defendants — the McDermott Defendants are no longer parties to the action. Plaintiffs’ remaining claims, asserted against the Wilmer & Lee and Baswell-Guthrie Defendants, grew out of the property acquisitions closed by those defendants.
E. Non-Parties Involved in Some Transactions
Kevin Donahue is a California citizen who, as previously noted, is the brother of Anne Donahue O’Shea, Kate Donahue, and Kim Donahue Welch.
Michael Shiffman is a California attorney who has represented plaintiffs and other members of their family in the past, and who has been involved in fifteen to thirty like-kind exchanges under Section 1031.
Jeffrey Weiss is another California attorney. His practice is concentrated on estate planning and tax law, including like-kind exchanges. Weiss represented plaintiffs in some of the real estate transactions forming the basis of this action.
Erica O’Leary was employed by the qualified intermediaries discussed below in the capacity of either an “Exchange Specialist,” or “Senior Exchange Specialist.”
The Qualified Intermediaries — As noted in Part II, supra, both the relinquished and replacement properties must pass through the same qualified intermediary; otherwise, the taxpayer will be denied deferred taxation under Section 1031. However, upon initial review of the documents prepared by Senior Exchange Specialist Erica O’Leary in connection with Thomas O’Shea’s 2007 relinquishment of his interest in a 392-unit multi-family apartment complex known as “The Plaza at Sherman Oaks” in Los Angeles, California (i.e., the first investment property relinquished by any of the plaintiffs in anticipation of a Section 1031 exchange for Huntsville real estate), and his subsequent acquisition of an interest in a replacement property located at 6820 Moquin Drive in Huntsville’s Cummings Research Park West, it appeared that requirement had been ignored by both Erica O’Leary and Thomas O’Shea. (Both halves of that transaction are discussed in Part TV(A), infra). That initial impression, which proved to be mistaken, was based upon the following facts.
The letterhead of Erica O’Leary’s January 26, 2007 cover letter, enclosing copies of documents related to the sale of O’Shea’s interest in “The Plaza at Sherman Oaks,” bears the name of “North American Exchange Company.” One of the documents included within that mailing — the “Exchange Agreement and Supplemental Closing Instructions” — was executed by O’Leary on behalf of “Timcor Exchange Corporation dba North American Exchange Company, a California corporation.” Finally, the May 4, 2007 letter from O’Leary to the Wilmer & Lee Defendants, enclosing documents necessary to close the purchase of property located at 6820 Moquin Drive in Huntsville, was written on stationary bearing the letterhead of “WaMu 10S1 Exchange.” Even so, as it turns out, all three entities — North American Exchange Company, Timcor Exchange Corporation, and WaMu 10S1 Exchange — had been commonly owned by Washington Mutual, Inc. of Seattle, Washington (abbreviated to ‘WaMu”) since 2006. Consequently, to minimize confusion, this court will follow the parties’ practice of referring to the entity employed by plaintiffs as the intermediary in all of the transactions at issue as either “WaMu 1031 Exchange” or, sometimes, just “WaMu.”
IV. THE REPLACEMENT PROPERTY ACQUISITIONS
A. The Moquin and Fountain Acquisitions
The first investment property relinquished by any of the plaintiffs in anticipation of a Section 1031 exchange for Huntsville real estate was Thomas O’Shea’s interest in a 392-unit multi-family apartment complex known as “The Plaza at Sherman Oaks,” located at 4474-4500 Woodman Avenue in Los Angeles, California. He owned an undivided 2.300224% interest in the property as a tenant in common with other persons and entities who (or which) are not parties in this case. O’Shea entered into two agreements to sell his interest in the property for the aggregate amount of $1,895,384.58 on or about January 2, 2007; that is, his interest was to be divided between two purchasers in the following manner: 1.873193% was to be sold to an entity known as “General Western Carmel Company” for “cash in the amount of $643,684.89 plus a pro rata portion of the existing debt on the Real Property attributable to the Interest (which Buyer shall receive a credit for at Closing) plus a pro rata portion of all existing unsecured debt of Seller (which Buyer shall assume and receive a credit for at Closing)”; and, 0.427031% was to be conveyed to “FB Realty Corporation” on similar terms.
Thereafter, on or about January 26, 2007, Thomas O’Shea entered into an “Exchange Agreement” with the “WaMu 1031 Exchange” to act as “qualified intermediary” at the closing of the sale of his interests to the foregoing entities. The agreement assigned O’Shea’s interests and sales contracts to WaMu, and directed that intermediary to transfer all of O’Shea’s right, title, and interest in the “relinquished property” to the purchasers, and to
hold the net proceeds [of sale] from the Closing ... until such time as Exchangor has located suitable like-kind Replacement Property in which to exchange. Thereafter Exchangor shall instruct Intermediary to acquire said Replacement Property on terms and conditions negotiated by Exchangor, as evidenced by a written agreement for the purchase thereof.
The sales were closed on February 1 and March 1, 2007, respectively, which meant that Thomas O’Shea, acting through his qualified intermediary, had to close on the acquisition of a replacement property no later than Tuesday, July 31, 2007: ie., 180 consecutive days from February 1, 2007, the earliest of the two sales of O’Shea’s fractional interest in the relinquished property.
Two “replacement properties” were identified by Thomas O’Shea as potential like-kind exchanges on the identification notice he signed following divestment of his interest in The Plaza at Sherman Oaks: ie., 5320 1-55 North in Jackson, Mississippi (a property that is not at issue in this action); and, 6820 Moquin Drive in Huntsville, Alabama (the subject of discussion in the following subsection).
It is important to recognize that the Fountain property discussed in Part IV(A)(2), infra, was not listed in any identification notice signed by Thomas O’Shea. Therefore, and for that reason alone, the acquisition of the Fountain property could not have become a “replacement property” for a valid Section 1031 exchange.
1. The Moquin transaction
The Moquin transaction closed on or about May 8,2007, well within Section 1031’s 180-day requirement, and involved the purchase of a 46,215 square foot office building constructed in 1989 on a 7.0 acre lot in Huntsville’s Cummings Research Park West, and located at 6820 Moquin Drive. The seller was “Susanne Bard, Trustee of the Ervin and Susanne Bard Family Trust,” and the gross purchase price was $6,800,000. The qualified intermediary standing between Thomas O’Shea and the Bard Family Trust was the “WaMu 1031 Exchange.” The agreement executed by O’Shea and Erica O’Leary, Senior Exchange Specialist for WaMu, was entitled “Assignment Agreement and Supplemental Closing Instructions (Tenant-in-Common Interest).” Pertinent portions of that agreement read as follows:
A. Exchangor and intermediary previously entered into an Exchange Agreement and Supplemental Closing Instructions, the terms of which are referred to and incorporated herein by this reference, pursuant to which Exchangor has transferred certain real property (the “Relinquished Property”) through Intermediary to effect a delayed tax-deferred exchange pursuant to the provisions of Section 1031(a) of the Internal Revenue Code.
B. Exchangor has selected suitable like-kind property in which to exchange located in the County of Madison, State of Alabama, as to a 25% beneficial interest in property commonly known as 6820 Moquin Drive, Huntsville, Alabama (the “Replacement Property”), legally described as follows: [property description omitted in original]
C.Exchangor has entered into an agreement (the “Purchase Agreement”) to purchase the Replacement Property from Susanne Bard, Trustee of the Ervin and Susanne Bard Family Trust (“Seller”) for a purchase price of $6,800,-000.00.
1. Assignment. Exchangor hereby conditionally assigns all of Exchangor’s rights, title, and interest in and to the Purchase Agreement, and certain obligations thereunder[,] to Intermediary. More particularly, Exchangor assigns to Intermediary Exchangor’s obligation to purchase the Replacement Property from Seller, specifically conditioned upon Exchangor performing all other obligations required of Exchangor to Seller and any obligations surviving the closing and transfer of title. Intermediary agrees to assume this obligation and perform said obligation in the manner provided for herein.
3. Funding and Closing. In order to avoid the duplication of transfer fees, closing costs, title insurance expenses and the like, the parties agree as follows:
(a) Exchangor’s right to receive [title to] the Replacement Property may be accomplished by direct deeding from Seller to Exchangor. Title to the Replacement Property will not be transferred to Intermediary at any time.
(b) Closing Agent shall have Seller execute the appropriate deed in favor of Exchangor and shall deliver said deed when Closing Agent obtains for Seller the agreed sales price, less payment for costs of sal applicable thereto, and subject to encumbrances of record, as evidenced by Closing Agent’s HUD-1 or settlement statement approved by Ex-changor, Seller[,] and Intermediary.
(c) All costs of acquiring the Replacement Property, including cash payments toward the purchase price and all other acquisition fees incident thereto, shall be borne first from the proceeds held by Intermediary [from the sale of Thomas O’Shea’s interest in “The Plaza at Sherman Oaks” in Los Angeles] and then, to the extent necessary, from the funds of Exchangor.
7.Authorization to Release Funds to Close. Execution of this Agreement by Exchangor constitutes an agreement and authorization by Exchangor that Intermediary may transmit exchange proceeds at the request of and upon the signature of Closing Agent in order to close the purchase of the Replacement Property.
1. Thomas O’Shea 22.483%
2. Jeri Holden 22.483%
3. San Francisco Residence Club, Inc. 11.241%
4. Staples Holding L.L.C. 11.241%
5. Beth Mason Living Trust 8.993%
6. Ronald and Loweeda Mitchell 8.993%
7. Dean and Katy Russell 4.496%
8. Fred and Martha Dolan 4.496%
4.496%
9. Scott McDermott 4.856%
10. William Chapman 4.856%
11. Roy Claytor 4.856%
2. The Fountain transaction
The Fountain transaction involved the simultaneous acquisition of a 10,000 square
A fair reading of the parenthetical phrase in the title of the O’Shea/WaMu Assignment Agreement — i.e., “(Tenantirir-Common Interest)” — together with the specification of the interest to be acquired stated in paragraph “B” (“a 25% beneficial interest”), and the language in paragraph 3(b) stating that “Closing Agent shall have Seller execute the appropriate deed in favor of Exchangor,” clearly implies that the Closing Agent was directed to prepare a deed in which the seller of the Moquin Drive property conveyed a 25% interest in the replacement property to Thomas O’Shea as a tenant in common with the other purchasers.
However, as will be discussed in greater detail in Part V of this opinion, infra, the deed to the Moquin Drive property did not vest any portion of the title in Thomas O’Shea, but in “Moquin, L.L.C.,” an Alabama limited liability company. Further, the extent of O’Shea’s fractional membership interest in that L.L.C. was less than 25%. Instead, the eleven members of Mo-quin, L.L.C., held the following fractional interests:
foot office building constructed in 1999 on a 2.30 acre lot in Huntsville’s Nichols Commercial Park, at 4092 South Memorial Parkway. The seller was “Johnson Alabama L.L.C.,” and the purchase price was $4,000,000. The original purchaser was defendant Scott McDermott, but he subsequently assigned his interest in and title to the property to “Fountain Partners, L.L.C.,” an Alabama limited liability company. The members of that limited liability company, and their respective fractional interests, were identical to those of Mo-quin, L.L.C., as listed in the preceding subsection. Again, however, the Fountain property was not described in the identification notice signed by Thomas O’Shea in connection with the sale of his interest in “The Plaza at Sherman Oaks” in Los Angeles. Therefore, the acquisition of the Fountain property could not have become a “replacement property” for a valid Section 1031 exchange. To the extent that plaintiffs claim otherwise, they are wrong.
B. The Corporate Drive Acquisition
The “relinquished property” sold in anticipation of purchasing a 50,400 square foot office building constructed on a 3.39 acre lot at 4955 Corporate Drive in Huntsville’s Cummings Research Park Ease was an apartment building located at 10471 Three Rivers Road, in Gulfport, Mississippi, known as “Cedar Pointe.” The property was owned by the Trust of Thomas and Anne O’Shea (“the O’Shea Trust”) and Kate Donahue, and each investor held an undivided 50% interest in the fee as tenants-in-common. It was sold on June 8, 2007 to “MS Palms Partners, L.L.C.” for approximately $4,740,000.
Three “replacement properties” were identified by the O’Shea Trust and Kate Donahue as potential, like-kind exchanges in the identification notice signed following the sale of their interests in the Mississippi property: i.e., 200 West Side Square in Huntsville, Alabama (a property implicated in the action assigned to Judge Kallon on this court); 4955 Corporate Drive in Huntsville, Alabama (the subject of the present discussion); and, 100 Quality Circle in Huntsville, Alabama (the subject of the discussion in Part IV(D), infra ).
The seller of the Corporate Drive property was “DA Technology, L.L.C.,” a Delaware limited liability company, and the purchase price was $5,400,000. The qualified intermediary standing between the O’Shea Trust and Kate Donahue was, again, the WaMu 1031 Exchange.
In an interesting twist discussed in Part V(B), infra, however, the Corporate Drive property was not directly sold by DA Technology, L.L.C., to any of the plaintiffs, Instead, the original purchaser was former-defendant Scott McDermott, who subsequently assigned his interest in and title the ProPerty to an Alabama limited liability company known as “Corporate Drive L.L.C.” The six members of that entity, and the fractional membership interests of each, were as follows:
1 1. The Trust of Thomas and Anne O’Shea 25.00%
2. Kate Donahue 25.00%
3. Jeri Holden 10.00%
4. Scott McDermott 13.34%
5. William Chapman 13.33%
6. Roy Claytor 13.33%
C. The Old Madison Pike Acquisition
The “relinquished property” sold in anticipation of purchasing a 70,000 square foot office building constructed in 2007 at 7027 Old Madison Pike in Huntsville’s Cummings Research Park West was located at 851 California Street in the Nob Hill section of San Francisco, California. It was solely owned by the “San Francisco Residence Club, Inc.,” a closely-held California corporation controlled by Anne Donahue O’Shea, Kate Donahue, Kevin Donahue, and Gwen Donahue, the sole shareholders and directors. The property was a five-story, 83-room hotel known as the “San Francisco Residence Club.” The identity of the purchaser of that property is not disclosed in the evidentiary materials, but it was sold for approximately $10,400,000. The sale was closed on July 10, 2007, which meant that San Francisco Residence Club, Inc., acting through the WaMu 1031 Exchange, had to close on the acquisition of a replacement property no later than January 6, 2008: that is, 180 consecutive days from July 10, 2007.
Three “replacement properties” were identified by the San Francisco Residence Club, Inc., as potential like-kind exchanges for the gain realized from divestment of the corporation’s interest in this property: ie., 200 West Side Square in Huntsville, Alabama (the property implicated in the action pending before Judge Kailon on this same court); a property in Hawaii that has not been described in any detail in the record, but one that is not at issue in this action; and 7027 Old Madison Pike in Huntsville, Alabama, the subject of the present discussion.
The seller of the Old Madison Pike property was “Triad Tech Point, L.L.C.,” and the purchase price was $3,800,000. The following entities and persons acquired the property as tenants in common, and the ownership interests of each were as follows:
91.8346% 1. San Francisco Residence Club, Inc.
0.2624% 2. TAK Tech Point, L.L.C.
0.0105% 3. KKA CAS, L.L.C.
7.5715% 4. 7027 Old Madison Pike, L.L.C. (McDermott)
0.0105% 5. Jeri Holden
0.0105% 6. Delta Trust (Elizabeth Mason IRA)
D. The Quality Circle Acquisition
As noted in Part IV(B), supra, the O’Shea Trust and Kate Donahue had identified an office building located at 100 Quality Circle in Huntsville’s Cummings Research Park as a potential like-kind replacement property in the identification notice they signed following the sale of their interests in the “Cedar Pointe Apartments” in Gulfport, Mississippi. The square footage and construction data is not disclosed in the record presented to this court, but the building appears to be occupied largely (if not altogether) by Wyle Laboratory’s “CAS Group.” The seller was “Tera Properties, L.L.C.,” and the purchase price was $11,250,000. The original purchaser was defendant Scott McDermott, but he subsequently assigned his interest in (and title to) the property to “Quality Circle, L.L.C.,” an Alabama limited liability company. The eight members of that company (and their respective fractional ownership interests) were as follows:
1. San Francisco Residence Club, Inc. 66.9%
2. Thomas O’Shea 7.3%
3. Kate Donahue 7.3%
4. Jeri Holden 4.8%
5. Scott McDermott 3.9%
6. Roy Claytor 3.9%
7. Delta Trust (Elizabeth Mason IRA) 3.8%
8. William Chapman 2.1%
The O’Shea Trust and Kate Donahue contributed funds to the acquisition of this replacement property, but interestingly the Trust is not listed among the members of “Quality Circle, L.L.C.” It is also interesting to note that the parties who actually contributed funds to the acquisition of the Quality Circle property (ie., the O’Shea Trust, Kate Donahue, KKA CAS, L.L.C., and TAX Tech Point, L.L.C.) do not match those listed in the operating agreement of Quality Circle, L.L.C. (i.e., the San Francisco Residence Club, Inc., Thomas O’Shea, Kate Donahue, Jeri Holden, Scott McDermott, Roy Claytor, Delta Trust, and William Chapman).
V. ACQUISITIONS CLOSED BY THE WILMER & LEE DEFENDANTS
The Wilmer & Lee Defendants served as the closing attorneys for the transactions described in Part IV, supra, as the “Moquin,” “Fountain,” and “Corporate Drive” acquisitions.
A. Acquisition of the “Moquin Drive” and “Fountain” Properties
The Moquin Drive and Fountain acquisitions grew from the fact that, in November of 2006, while Thomas O’Shea was traveling with his Mend Fred Haywood, a Hawaii-based real estate broker, Haywood suggested that O’Shea consider investing in Huntsville real estate. They traveled to the city, where Haywood introduced Thomas O’Shea to Scott McDermott. During O’Shea’s brief, initial visit to the area, McDermott accompanied him on a tour of several properties, including the one located on Moquin Drive. O’Shea told McDermott that, if he purchased investment property in Huntsville, he wanted to do so as part of a Section 1031 like-kind exchange. McDermott replied that he had experience with such acquisitions, but advised O’Shea that, in order to comply with the requirements of Alabama law on real estate acquisitions, he should employ a local attorney to close the transaction.
Following his return to California, Thomas O’Shea told his wife, Anne, and her sister and brother, Kate and Kevin Donahue, that he was impressed by the investment potential of Huntsville real estate, and Scott McDermott’s credentials.
Thomas O’Shea returned to Huntsville in January of 2007, accompanied by his brother-in-law, Kevin Donahue. O’Shea again told McDermott that any Huntsville investment properties acquired by them needed to be structured as a “like-kind exchange” under Section 1031 of the Internal Revenue Code, and McDermott assured both men that he was “quite capable of doing that.”
O’Shea testified that, during one of his visits to Huntsville, McDermott disclosed that he had been “arrested” in connection with “some real estate transaction.” O’Shea did not elaborate, other than to say that McDermott “volunteered” the information. The nature of the conduct that precipitated the arrest is not clear, nor does the record establish whether McDermott was subsequently convicted of a crime, although the innuendo of O’Shea’s non sequitur remembrance is that McDermott was convicted.
In February of 2007, Scott McDermott and Roy Claytor traveled to California, where they met Anne Donahue O’Shea and Kate Donahue.
McDermott and his colleagues, Claytor and William Chapman, invited plaintiffs to join them in their plans to purchase the Moquin Drive property. McDermott initially expected plaintiffs to be the sole investors in the property, but eventually assembled a group of other investors to purchase fractional interests of the whole fee. At least two of those other investors, Fred Haywood and Beth Mason, also intended for their investments to be part of a like-kind exchange. McDermott and his colleagues ultimately decided to forego the commission normally paid real-estate brokers for finding and bringing purchasers to the closing table, and instead took ownership stakes in what all of the purchasers hoped (and expected) would be an income-producing investment.
As discussed in Part TV(A), supra, Thomas O’Shea relinquished his interest in “The Plaza at Sherman Oaks” in Los Angeles prior to acquisition of the Moquin Drive property. That sale occurred on or about February 9, 2007. He filled out a form identifying two possible replacement properties in anticipation of a like-kind exchange: the Moquin property; and an investment property located in Jackson, Mississippi. Thomas O’Shea sent that form to the WaMu 1031 Exchan