1031 Exchange - $400k

[Brian Adams]

I buy 100 to 400 unit apartment buildings and I have an investor that owns an apartment building who is 67 years old. 

She has owned and managed the property for years. With her age she is wanting to sell the property and invest in my investment model of her being a passive investor and not be involved in the day to day grind. My model is that she would secure her ownership in my deals via LLC units.

I am a CPA and my understanding of the 1031 rules don't allow like kind treatment in this case for a swap of property in exchange of LLC units or a partnership interest.

If she sells her building she would net 400k available to invest in my deal before taxes so curious to get your thoughts. 

Is there a way to utilize the 1031 provisions to defer her taxes and invest in my deal?

[Brandon Hall]

@Brian Adams

Per @Bill Exeter's website:

"It is important to understand the distinction here. The underlying investment property is owned by the partnership and not by the underlying partners. The underlying partners merely own a partnership interest in the partnership entity. This partnership interest is a personal property interest and not a direct ownership interest in the underlying real estate.

This is a critical distinction to understand when planning and structuring a 1031 Tax Deferred Exchange transaction involving real estate owned through a partnership. Individuals wishing to complete a 1031 Tax Deferred Exchange must sell a direct interest in real estate (fee title) and subsequently acquire a direct interest in replacement real estate (fee title)."

http://www.exeter1031.com/article_1031_exchange_pa...