1031 exchange to buy out a co-investor?

[Sarah McCarty]

Hello:

I am selling an owner occupied two family home and I will profit approximately 150K off of the investment portion of the property. I have another investment property (purchase price 275K, mortgage 210K) that I own with another person. Is it possible to use the profits from the sale to buy my co-investor out of my other property (purchased value 275K, current value 350K) under the umbrella of a 1031 exchange? Probably not but worth a try. 

Thank you! 

[Dave Foster]

@Sarah McCarty, Actually you may be able to do it.  If you and the other person are not related parties, own the property as tenants in common, and you don't own more than 50% of the property.  In that event you could sell your two family and purchase the other persons interest in the property you own together using a 1031.

Remember that you need to purchase at least as much as you sell. And your post only talks about the profit not the sales price. But if you each own 50% TIC and the property you are selling is worth $175K you could sell it and purchase the 50% of your partner and still do a full exchange.

The other issue you'll have may be the mortgage on the jointly held property.  Depending on the lender they may not let your partner off the loan.