Explaining the Swap & Drop 1031 Exchange

Swap & Drop 1031 Exchange

We have talked before about the drop and swap exchange and how it can be beneficial in certain like-kind exchange situations. In this article, we are going to explain the inverse of the drop and swap exchange – the swap and drop 1031 exchange.

What is a Swap & Drop 1031 Exchange?

A swap and drop 1031 exchange is essentially the inverse of a drop and swap exchange.

To quickly review – a drop and swap exchange is a 1031 exchange tactic often used by taxpayers in a partnership. If there are 3 partners who own a piece of real property, but only 2 of them wants to do a 1031 exchange on the property, the partners can convert their interests in the property to tenancy-in-common interests. This allows the odd partner out to cash out their share, while the remaining 2 partners conduct a 1031 exchange.

In a swap and drop exchange, the partners would conduct the 1031 exchange of their property. Then at some point down the line, the partner who wants out would exit the partnership and cash out. Both the drop and swap and swap and drop techniques need to be carefully constructed in order to be successful.

Qualified Intermediary Services

At Commercial Partners Exchange Company, our intermediaries have the skills and experience to help you through the details of your 1031 exchange. We have over two decades of experience helping taxpayers throughout the state and around the country with their 1031 exchanges of real estate. If you are looking for a way to defer taxes on the sale of real estate, we can help you! Contact our qualified intermediaries today to discuss the details of your exchange. Our office is located in downtown Minneapolis but we work with clients across the United States.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

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