1031 Exchanging into Syndication as a General Partner

[Keith Meyer]

Tried searching for an example of what I'm asking in the existing forum posts but couldn't find this specific example.

We're looking to 1031 into our own syndication deal we're putting together. Since it's our deal we'd ideally be a General Partner, with several other GP's and LP's. As I understand it, you cannot 1031 into a traditional syndication because it violates the like-kind requirements, as your Relinquished Property is real property, and your new ownership interest in the syndication LLC is personal property.

I've heard previously that the workaround here is to form a TIC or a DST to hold your 1031 interest, since this is treated as having an ownership in real estate interest in the eyes of the IRS. The problem here is that these typically need to be passive, so this would not jive with our intent to be GP's in a syndication. Hopefully I'm wrong, but I think any funds invested as a GP or an LP would have to be non-1031 funds.

I've also been told that the syndication structure would need to be substantially complicated by forcing the GP's and LP's to instead own shares in the TIC/DST, and become co-owners in the deal rather than partners. This requires separate TIC Agreements, separate Management Agreements, etc.

Since interest in using 1031 funds in passive syndications is becoming much more popular, I have to think there's a way to minimize the complexity and hassle of this arrangement. Any suggestions out there from investors who have been down this road already?