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Updated over 7 years ago on . Most recent reply

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John Phillips
  • Handyman
  • Pensacola, Fl
1
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14
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1031 exchange, syndication, taxes

John Phillips
  • Handyman
  • Pensacola, Fl
Posted

I recently learned that a syndication can sell (or refinance) a property, and you can withdraw your funds (and yourself) from the syndication. Also, though very difficult, the syndication can 1031 into a larger property. Here's my question. If I'm in a syndication and I want to get out during the sell or refinance, would I be able to use my gains (entire funds) to 1031 exchange into a qualifying property, by myself, to defer taxes. Or, would it be pointless since the original funds were taxed, the yearly returns were taxed, and, since it's typically a minimum 3-5 year investment, is there any capital gains tax due to the length of the investment? 

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Dave Foster
#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
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Dave Foster
#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
Replied

@John Phillips, That's the single biggest roadblock in maximizing tax mitigation when going into a syndicated product.  Unless the project has been set up as a tenants in common project you cannot 1031 your part of the proceeds out at sale.   You will pay the tax but then have a clean slate with no need to do a 1031 at that point.  Reinvest as you will - or don't. 

I think @David Thompson, a good syndicator himself has an article he's written on this as well.

  • Dave Foster
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