Tips for Exchanging 1031 Property as an LLC or Partnership

Partnership 1031 Exchange

Consider the following 1031 scenario: A seller owns a single-family home with a friend of theirs in a partnership. Can one of the partners owning that single-family home do a 1031 exchange and buy another rental property? That's our topic for today's 1031 education article.

Who is the Taxpayer?

The question really comes down to "who is the taxpayer that has held title to that old single family home?"

  • Is it an entity such as a partnership or LLC?
  • Or is it the two individuals owning as tenants-in-common?

If they are in fact in a partnership or business entity, it may be necessary to reconfigure the ownership so that the old entity now owned solely by the surviving taxpayer that wants to do the exchange holds title to its portion of the property, and the other partner is redeemed out of the partnership and takes a tenant-in-common interest in a portion of the underlying property.

Planning Opportunities

These are planning opportunities and it's nice to get in front of the deal well before the sale of the relinquished property. For more information on this see, our whiteboard video related to this topic.

  • 1031 Hotline: If you have questions about 1031 exchange depreciation recapture, or anything regarding 1031, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

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