PANUTHOS, Chief Special Trial Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect when the petition was filed. ¹ Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case.

Respondent determined a deficiency of $14,475 in petitioners' 2005 Federal income tax and an accuracy-related penalty of $2,895. After concessions, ^{22011 Tax Ct. Summary LEXIS 14">*15} the sole issue for decision is whether petitioners are entitled to nonrecognition of gain under section 1031 for a 2005 real estate transaction.

Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioners resided in California at the time the petition was filed.

Petitioners owned an undeveloped parcel of property in Lake Havasu City, Arizona (Arizona property). Petitioners held the Arizona property for investment. Petitioners desired to own investment property closer to their California residence. After receiving some limited advice concerning a tax-free exchange of properties, petitioners took steps to sell the Arizona property and purchase new property with the intention of executing a tax-free exchange. On March 4, 2005, petitioners sold the Arizona property for $76,000. The buyers of the property paid petitioners $10,000, and the remaining $66,000 was placed in an escrow account with Capital Title Agency, Inc. (Capital Title). At petitioners' direction $61,743.25 was held in the escrow account. Capital Title initially released $4,256.75 to petitioners. Petitioners' basis in the Arizona property was $8,500.

In furtherance of the purchase petitioners made payments ³ to Chicago Title Co. (Chicago 2011 Tax Ct. Summary LEXIS 14">*16 Title) and placed in an escrow account as follows:

¹This payment was transferred from the Capital Title escrow account to the Chicago Title escrow account as petitioners directed.

The Capital Title and Chicago Title escrow agreements did not reference a like-kind exchange under section 1031, nor did they expressly limit petitioners' right to receive, pledge, borrow, or otherwise obtain the benefits of the funds.

In general, the Commissioner's determination set forth in a notice of deficiency is presumed correct, and the taxpayer bears the burden of showing that the determination is in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111">290 U.S. 111, 290 U.S. 111">115 (1933). Pursuant to section 7491(a), the burden of proof as to factual matters shifts to the Commissioner under certain circumstances. Petitioners did not allege that section 7491(a) applies. See sec. 7491(a)(2)(A) and (B). Therefore, petitioners bear the burden of proof. See Rule 142(a).

The general rule regarding recognition of gain or loss on the sale 2011 Tax Ct. Summary LEXIS 14">*17 or exchange of property is that the entire amount of the gain or loss is recognized. Sec. 1001(c). An exception to the general rule is found in section 1031.

Section 1031 provides that no gain or loss is recognized when business or investment property is exchanged solely for other business or investment property of like kind. The regulations define "like kind" as a reference to the nature or character of the property and not the property's grade or quality. Sec. 1.1031(a)-1(b), Income Tax Regs. In order to take advantage of the nonrecognition provisions of section 1031 through a deferred exchange, a taxpayer must satisfy a number of technical requirements. ¹ Sec. 1031(a)(3); sec. 1.1031(k)-1, Income Tax Regs.

A deferred exchange is defined as "an exchange in which, pursuant to an agreement, the taxpayer transfers property held for * * * investment * * * and subsequently receives property to be held * * * for investment". Sec. 1.1031(k)-1(a), Income Tax Regs. To qualify as a deferred exchange the transaction must be an exchange of property, not a transfer of property for money. Id. The reinvestment of the proceeds from a cash 2011 Tax Ct. Summary LEXIS 14">*18 sale of one property into a second property of like kind will not qualify as a section 1031 exchange. Greene v. Commissioner, T.C. Memo. 1991-403 (citing Carlton v. United States, 385 F.2d 238">385 F.2d 238, 385 F.2d 238">242 (5th Cir. 1967), Coastal Terminals, Inc. v. United States, 320 F.2d 333">320 F.2d 333, 320 F.2d 333">337 (4th Cir. 1963), and Estate of Bowers v. Commissioner, 94 T.C. 582">94 T.C. 582, 94 T.C. 582">589 (1990)); Lee v. Commissioner, T.C. Memo. 1986-294; Gibson v. Commissioner, T.C. Memo. 1982-342; sec. 1.1031(k)-1(a), Income Tax Regs. Gain or loss may be recognized if the taxpayer actually or constructively receives money that does not meet the qualifications of section 1031(a) before the taxpayer actually receives like-kind property. Sec. 1.1031(k)-1(a), Income Tax Regs.

"The taxpayer is in constructive receipt of money or property at the time the money or property is credited to the taxpayer's account, set apart for the taxpayer, or otherwise made available so that the taxpayer may draw upon it at any time". Sec. 1.1031(k)-1(f)(2), Income Tax Regs. If the taxpayer's control of receipt of the money or property is subject to substantial limitations or restrictions, then there is no constructive receipt. Id. To avoid being in constructive receipt 2011 Tax Ct. Summary LEXIS 14">*19 of money or property, a taxpayer may use a qualified escrow account. Section 1.1031(k)-1(g)(3), Income Tax Regs., defines a qualified escrow account as the following:

(ii) A qualified escrow account is an escrow account wherein--

(A) The escrow holder is not the taxpayer or a disqualified person * * *, and

(B) The escrow agreement expressly limits the taxpayer's right to receive, pledge, borrow, or otherwise obtain the benefits of the cash or cash equivalent held in the escrow account * * *.