1031 Exchange question

[Brendan H.]

Clients just sold a property & are 1031 Exchanging to a new property.

Both the husband and wife were on the title, and the loan, of the relinquished property.

They will both be on the title of the new property.

However, is the wife required to be on the new loan as well? Or can she remain off the loan?

They would prefer to keep her off the loan if it doesn’t impact the 1031X.

Thank you!

[Dave Foster]

@Brendan H., Source of any debt does not matter in the 1031.  The key is that the tax payer for the old property (their joint tax return as @Bill B. said) is the tax payer for the new property.

And that they purchase at least as much as their net sale and use all of the proceeds from the sale in the purchase.  Cash to add to the sales proceeds to get to the reinvestment target  can come from anywhere including a loan to or from anyone.  Or cash held anywhere.  

So both selling and both buying but only him on the loan is perfectly fine from the 1031 perspective.