1031 Exchange into Tenants in Common

[Adam Ward]

I'm interested in doing a 1031 exchange out of a couple SFRs and plan to use 100% of the proceeds to purchase a 50% TIC interest in a larger commercial deal that will have a mortgage. The SFRs are free & clear. My question is regarding whether the debt on the replacement property will cause a portion of the 1031 exchange to be taxable.

Using hypothetical numbers for simplicity:

Proceeds from relinquished properties = $250K

Replacement property purchase price = $1M

25% down payment on replacement property = $250K (all of which come from relinquished property proceeds)

The replacement property would have a $750K mortgage, and ownership of the property would be 50/50 tenants in common.

From a tax standpoint, is my 50% interest treated as $125K equity + $375K debt (in which case I believe a portion of the sale would be taxable)?  Or would it be completely tax deferred since I used 100% of the proceeds for the down payment?

Open to any and all thoughts/suggestions.  Thank you!