In a 1031 land exchange the property may be owned by an entity. Within that entity, some of the owners or partners may be inclined to do a 1031 exchange, while other owners or partners are uncertain or they just want to take their cash and run - pay their taxes and be done. What's the best way to proceed in this type of situation?
Reconfiguring Ownership
In these situations, people often think about reconfiguring the ownership of the old relinquished property before their land sells. The idea is if we can keep the old entity comprised now of only the exchange-minded partners or owners and have the entity that owned the property do the exchange, we have a stronger, more defensible exchange.
Tenant-in-Common Interest
The way we can do that is we can redeem or distribute out to the non-exchanging members or partners their tenant in common interest in the underlying land so they become in effect co-sellers who received their portion of the sales proceeds separate and apart from the entity that's going to do the 1031 exchange. There are many variations of the drop-and-swap but this is the one that I like best for limited liability companies and partnerships that own land and want to do 1031 exchanges.
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