Rental Property Investor · Palo Alto, CA · Member since 2016 · 29 posts · 10 votes
Hello BP Crew,
I'm about to sell a property where I have around $100k in short term capital gains. I have sole ownership with just my name on the title. Can I do a 1031 exchange and buy a property where I will have joint ownership with another person? The other person would be a partner (not a spouse).
Thanks in Advance. Any advice is greatly appreciated.
You need to be very careful when around TIC's and not let the structure be deemed a Partnership. A Partnership is the kiss of death for §1031 exchanges. Tread carefully. A real trap for the unwary.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
Short answer: Yes
I was in a similar position last year with a 1031 and considering deploying the capital into a larger deal with another partner. My 1031 exchange agent had a few rules around how that partnership should be structured, but it was an option (although I ended up passing on that deal so didn't live through the process myself)
Pasadena, CA · Member since 2019 · 136 posts · 148 votes
4y
@Matthew Holland - You can. You can structure the acquisition as joint tenants in common on the replacement side, but you'll have to fulfill the obligations of your 1031 exchange with your proportional share of the acquisition. Replace the net sale price of your relinquished property and spend all of your net proceeds. You can own whatever portion of the replacement property that you choose in the joint tenants relationship.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
Matthew: I think Jon combined two options above in to one.
You PROBABLY want tennants in common. That is the option where you each own any specific percent and it can be sold to or inherited by someone of your choice.
Joint tenancy is equal percentage ownership among all joint tenants and when you die the other joint tenants receive your ownership, skipping probate but you end up leaving the property to your partner(s) instead of family if that was your intent.
You need to be very careful when around TIC's and not let the structure be deemed a Partnership. A Partnership is the kiss of death for §1031 exchanges. Tread carefully. A real trap for the unwary.