1031 and partnerships - Posted by Bill Taylor

Posted by John Merchant, JD on July 21, 2002 at 23:43:32:

Any 1031 Facilitator company, such as Starker Exchange Svs., which is national, or any of the many others, would be able to look at an individual 1031 situation, like this one, and give you a free answer in a minute.

I believe Starker has a web presence, probably www.starker.com, but any of the search engines should be able to find them, or a myriad of others, in less time than it’s taken me to post this. Also try www.1031.com

1031 and partnerships - Posted by Bill Taylor

Posted by Bill Taylor on July 21, 2002 at 23:18:58:

I have been in a partnership for 18 years and I now would like to disolve the partnership. We have 1 property in that partnership. it has been sold and the closing should be this week. If we sell the property and disolve the partnership can we do a 1031 exchange individually with our share of the proceeds? We also have a loan on the home of about 35000. The house should five us in excess of 59000. We have a 60/40 partnership. I hope this is enough info for you to give us an answer.

Re: 1031 and partnerships - Posted by JHyre in Ohio

Posted by JHyre in Ohio on July 22, 2002 at 06:19:48:

If you distribute respective 60/40 interests in the home to the partners, those “tenant in common” interests constitute RE and are exchangeable for other RE under the case law. The IRS would challenge the transaction based on the “step transaction” doctrine, basically saying that 1031 was not meant to be used in this manner. No court case has ruled on these facts, so the ultimate outcome of this manuever is uncertain.

If the thing is closing in the partnership’s name and that is unalterable, the partnership could mnake the exchange into another property and distribute undivided portions of the new property to each of you…then you’d still be partners, in effect. You could buy your partner out of his “undivided interest”. This approach has a bit more support in court than the former approach, though it’s not 100%.

John Hyre