1031 exchanges involving more than one property owner can get complicated quickly. In this article, we are going to answer some FAQs about 1031 exchanges involving property owned by multiple taxpayers
The Benefits of Tenancy-in-Common
When you purchase real property with other co-purchasers, it’s often a good idea to reconfigure your asset ownership into tenancy-in-common so that each tenant can accumulate time in separate ownership capacities and have the option of doing a 1031 exchange when it comes time to sell.
Techniques to Try
There are some techniques for doing 1031 exchanges involving property owned by more than one taxpayer. Some of these techniques are rather crude, such as breaking up a property as tenants-in-common and crossing your fingers in the hope that you’ve held the property long enough to satisfy the 1031 exchange requirements.
Other techniques are more refined, such as “spin-offs.” This technique works great if you’ve got an LLC or partnership because you can spin-off subsidiaries, and they are considered continuations of the predecessor for tax purposes.
The Problem with Corporations
The nut that I’ve never seen anyone crack is how do you reconfigure the ownership with the property is owned by an S-corp or C-corp? In these cases, distributing the asset out of the entity can trigger gains. It’s much more difficult to reconfigure a corporation than an entity that’s taxed as a partnership.
CPEC1031, LLC
1031 exchanges involving multiple property owners can get very complicated so it’s a good idea to work with a qualified intermediary who knows how to deal with these situations. At CPEC1031, we have been facilitating exchanges of all kinds for more than two decades. Contact us today to start your 1031 real estate exchange!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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