1031 Exchange into Partnership

[Pete Harper]

I have a question on 1031 exchange. I own a property in CA in my own name. I would like to sell the property and use 1031 exchange to purchase a property in TX. The TX property is worth significantly more than the property in CA. To cover the difference I would like to bring in another partner on the TX property. Is this possible?

The last 1031 exchange I did we sold in CA in our name, purchased property in TX in our own name, then transferred into TX LLC. It was explained to me at the time that the LLC transfer had to occur in TX otherwise CA would see the transfer as a taxable event.

[Ashish Acharya]

Originally posted by @Pete Harper:

I have a question on 1031 exchange. I own a property in CA in my own name. I would like to sell the property and use 1031 exchange to purchase a property in TX. The TX property is worth significantly more than the property in CA. To cover the difference I would like to bring in another partner on the TX property. Is this possible?

The last 1031 exchange I did we sold in CA in our name, purchased property in TX in our own name, then transferred into TX LLC. It was explained to me at the time that the LLC transfer had to occur in TX otherwise CA would see the transfer as a taxable event.

If you structure the new asset under TIC ownership, you will be able to. Your QI should be able to answer all this.

Usually you can’t 1031 into the new partnership. If you really want to do under partnership, you can first create a partnership. Then, contribute your property into it (non taxable event, but creates 704(c) allocation issue). Your partner will contribute the money to partnership.Then partnership does the exchange.