1031 Exchange - Distributing Equity In MultiProperty Purchase

[Pierre E.]

Hey BP people!

Question about options on splitting debt and equity in a 1031 exchange when using it to purchase multiple nee assets

If you take a property, 1031 exchange it into multiple properties lets say one property 500k value with 200k debt into two new properties lets say property a is worth 250 and property b is worth 350k Could i purchase with property a owned free clear no debt, and then property b 50k equity plus whatever else I add in from purchase?

Are you allowed to choose %equity among the new purchases or do you have to keep the same ratio of equity from previous property into the new properties?

[Whitney Nash]

Hello @Pierre E.

Yes, you have flexibility as to the amount of exchange funds used towards each replacement property and the amount of debt offset attributable to each, so you can have different ratios between multiple replacement properties. To comply with 'exchanging up' for full tax deferral, the amounts are seen as cumulative across all replacement properties (and relinquished properties too, if that were the case).