subject to 99-year condominium leases qualified for nonrecognition treatment under section 1031(a) because those exchanged properties were property of a like kind. Id. at 6570.

In Koch, we rejected the Commissioner's contention that the taxpayer/lessor's interests (primarily the right to condominium rental payments) could be separated from the taxpayer's fee simple interest in that land. We observed that: (1) The taxpayer's right to rent was not a separate and distinct item of property but part of the bundle of rights incident to ownership of the fee; (2) the bundle of rights and its related obligations were inextricably bound up with the fee simple interest; (3) the condominium leases contained numerous provisions (some of which we briefly summarized in our findings in Koch) not only securing the payment of rent but also protecting the value of the taxpayer's reversionary interest; and (4) the right to rent was merely an incident of ownership of the fee simple interest. Id. at 66-68. We also acknowledged that the 99-year condominium leases prevented the taxpayer from taking physical possession of the land received and using it for other purposes. We viewed that leasehold restriction on the taxpayer's use of the new land as a distinction in the grade or quality of the exchanged old and new properties as opposed to a difference in their kind or class. We observed that section 1031(a) "was not intended to draw any distinction between parcels of real property however dissimilar they may be in location, in attributes, and in capacities for profitable use."" Koch v. Commissioner, 71 T.C. at 68 (quoting Commissioner v. Crichton, 122 F.2d at 182).12 Finally, in Koch v. Commissioner, supra at 70, we held that the value of the taxpayer's condominium lease interests did not constitute taxable other property or boot under section 1031(b), because the "lessor's fee simple interest cannot be so fragmented."

In return for the gold mining property Peabody, among other things, received the Lee Ranch coal mine, which was subject to two coal supply contracts. Respondent acknowl

12 Sec. 1.1031(a)-1(b), Income Tax Regs., contains the explanation that the "like-kind" requirement concerns the nature or character of property and not its grade or quality. As we observed in Commissioner v. Crichton, 42 B.T.A. 490, 492 (1940), affd. 122 F.2d 181 (5th Cir. 1941), substantially similar interpretations of the term "like kind" have appeared in all applicable regulations beginning with those issued under the Revenue Act of 1921.

edges that the Lee Ranch (consisting of fee simple land and coal leases) is like kind to the gold mining property and qualifies for nonrecognition treatment under section 1031(a).13 Respondent, however, contends this case is distinguishable from Koch. Respondent argues that the coal supply contracts are separable from the Lee Ranch mine and constitute taxable other property or boot under section 1031(b). In other words, respondent argues those two supply contracts can be fragmented and are not inextricably bound up with Peabody's ownership of the Lee Ranch mine's coal reserves. We disagree.

Although each supply contract is also a contract for the sale of goods under New Mexico law and does not give the utility/buyer a right to extract coal from the Lee Ranch mine land, in the context of this case we do not find those distinctions to be significant nor to sufficiently distinguish this case from Koch. Peabody's right to mine and extract coal from the Lee Ranch mine land and its supply contracts payment rights for the coal cannot be separated from its ownership of the Lee Ranch mine coal reserves. Those rights are part of the bundle of rights incident to Peabody's ownership of the Lee Ranch mine land coal reserves. Indeed, those supply contracts give Peabody no right to mine and extract coal from that land. Instead, Peabody's right to mine and extract coal from that land comes solely from its ownership of that land and coal reserves.

As to the right to payment under the contracts for coal furnished, those rights are ancillary to Peabody's ownership of the coal reserves. Accordingly, the question of whether the supply contracts afford an advantageous or detrimental coal price to Peabody is immaterial in that setting. See Koch v. Commissioner, 71 T.C. at 68. Because we hold that the right to receive income from the tenant is part of the bundle of rights ancillary to and inherent in the ownership of the realty, the question of whether the lease was advantageous or detrimental to the fee owner is immaterial.

It is true Peabody is obligated to mine and supply coal to meet the operating needs of power stations and that Peabody is prohibited from impairing the contracted-for supply by

13 Apparently, respondent does not dispute that the exchange of leasehold for fee interest here is all right. In addition Peabody's right to mine and extract coal from the Lee Ranch mine is obviously substantially alike to the right to mine and extract gold from the two gold mines.

selling coal to other buyers. In our view those contract obligations and restrictions constitute a distinction in the grade or quality of the old and new mining properties rather than a difference in their kind or class. The new coal mine property is of a like nature or character to the gold mining property Peabody exchanged. By exchanging the gold mining property for the coal mining property subject to the supply contracts, Peabody is essentially continuing the original investment which remains fully unliquidated. See Commissioner v. P.G. Lake, Inc., 356 U.S. at 268. Respondent, contrary to our holding in Koch, is attempting to fragment and currently tax Peabody on the supply contracts before their actual realization.

We hold that the coal mine subject to the TEPCO and WEF supply contracts Peabody received is like kind to the gold mining property transferred and that Peabody's exchange qualifies for nonrecognition treatment under section 1031(a). See Koch v. Commissioner, 71 T.C. 54 (1978). In the light of that holding and because the supply contracts cannot be separated from Peabody's ownership of the Lee Ranch mine coal reserves, it follows that those contracts are not taxable as other property or boot under section 1031(b). See id.

D. Conclusion

On the basis of the forgoing, we conclude, as a matter of law, that petitioner is entitled to summary judgment and respondent is not so entitled.

An appropriate order will be issued at docket Nos. 20328-04 and 6899-05.

L.S. VINES, PETITIONER v. COMMISSIONER OF INTERNAL
REVENUE, RESPONDENT

Docket No. 12763-04.

Filed May 11, 2006.

P, a lawyer for over 34 years, settled a class action law suit during 1999 and received compensation for his legal services. P received approximately half of the compensation in taxable year 1999 and half in taxable year 2000 and reported it as

ordinary income for the respective taxable years. P decided to
leave the practice of law and begin a business of trading secu-
rities. After P failed to cover a margin call, P's brokerage
accounts were liquidated on Apr. 14, 2000, resulting in a
short-term capital loss. Throughout his career, P relied on
accountants for tax advice. When P filed for an extension of
time to file his 1999 tax return on Apr. 17, 2000, P did not
elect the mark-to-market method of accounting pursuant to
sec. 475(f), I.R.C., because P's accountant was not aware of
the mark-to-market election for securities traders or any
related revenue procedure. In June 2000, P learned of the
mark-to-market election for securities traders from a friend,
obtained the citation of sec. 475(f), I.R.C., and learned that
Rev. Proc. 99-17, 1999-1 C.B. 503, required the election to be
filed no later than the due date for the previous year's tax
return; i.e., Apr. 17, 2000. P then employed a law firm to file
the election and a request for relief pursuant to sec.
301.9100-3(c), Proced. & Admin. Regs. On July 21, 2000, the
law firm submitted the election on P's behalf. P did not trade
any securities, realize any further gains, or suffer any further
losses between Apr. 17 and July 21, 2000. P's losses were
exactly the same on July 21, 2000, as they were on Apr. 17,
2000. In a private letter ruling, dated Dec. 5, 2001, R denied
P's request for an extension of time to file the election pursu-
ant to sec. 301.9100-3(c), Proced. & Admin. Regs. Subse-
quently, R determined deficiencies in tax for P's taxable years
1999 and 2000. Held: P is entitled to an extension of time to
file his sec. 475(f), I.R.C., election pursuant to sec. 301.9100-
3, Proced. & Admin. Regs. P is entitled to relief because he
acted reasonably and in good faith and the interests of the
Government will not be prejudiced. Accordingly, P is entitled
to the benefits of sec. 475(f), I.R.C., for the taxable year 2000
as if he had timely filed the election.

David D. Aughtry, Roy J. Crawford, and Hale E. Sheppard, for petitioner.

Monica D. Armstrong, for respondent.

WELLS, Judge: Respondent determined deficiencies in tax for petitioner's 1999 and 2000 taxable years of $6,312,641 and $6,835,942, respectively.1 The issue we decide is whether, pursuant to section 301.9100-3, Proced. & Admin. Regs., petitioner should be granted an extension of time to file a section 475(f) election for his taxable year 2000. Unless otherwise indicated, all section references are to the Internal

1 Respondent contends that petitioner is not entitled to certain deductions for meals and entertainment for taxable year 1999, gifts to employees for taxable year 1999, and alimony payments for taxable year 2000, all of which petitioner concedes.

Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.

FINDINGS OF FACT

Some of the facts and certain exhibits have been stipulated. The parties' stipulations of fact are incorporated in this Opinion by reference and are found as facts in the instant case.2 At the time of filing the petition, petitioner resided in Birmingham, Alabama. Petitioner is an attorney who practiced personal injury law in Birmingham, Alabama, for approximately 34 years. During January 1994, petitioner began representing certain plaintiffs in a national class action lawsuit that settled with the defendants during 1999. Petitioner received approximately one-half of his compensation for settling the class action suit during the taxable year 1999 and the other half during the taxable year 2000. Petitioner reported net profits of $18,520,775 and $16,966,055 from his law practice on line 29 of Schedule C, Profit or Loss From Business, of his Forms 1040, U.S. Individual Income Tax Return, for taxable years 1999 and 2000, respectively.

During August 1999, petitioner established brokerage accounts with DLJdirect and Ameritrade for the purpose of investing a portion of his compensation from settling the class action suit. Petitioner deposited $5 million in each of those accounts. Petitioner later established a brokerage account with Terra Nova during December 1999.

During the fall of 1999, petitioner decided to wind down his law practice and begin a new career as a securities trader. Previously, petitioner had traded in the stock market only irregularly. Between December 1999 and January 2000, petitioner concluded the class action suit, transferred his remaining cases to other attorneys, paid off the balance of the lease of his downtown-Birmingham law office, and terminated the lease. By late January 2000, petitioner had spent a substantial amount of money equipping and organizing one floor of his home as a securities trading office. Based on the volume and frequency of petitioner's trading, the parties

2 The instant case was tried in the Court's electronic (north) courtroom where evidence was presented electronically and certain testimony was taken by video conference. In addition to the usual paper format, the parties filed briefs on CD-Rom.