1031 identification 3 property or 200% rule for office building

[Byron Bohlsen]

Hello!

I am currently working towards buying ownership into an office building structured with an association of individual owners for the individual units. I would be buying 4+ of the units. Each unit has its own tax PID, but the physical address on the PID website is the same physical address for each individual PID, the main building address. I am trying to determine if I should use the 3 property identification sheet, identify the physical address of the building along with my approx ownership percentage of the building based on unit count percentage. Or should I be using the 200% rule identification sheet and list each PID individually?

For bonus points, how would one break this out on their schedule E, list the one property and combine the financials as if it were a multi-family property, or should I be listing each unit individually on schedule E with its own financials? I assume how I identify in the exchange will determine how I file the schedule E.

My impression is that since were are dealing with multiple PIDs I should be using the 200% rule and breaking them out individually, as well as report on schedule E individually. It seems this would make it a lot cleaner and more straight forward if I were ever to sell some of the units. Looking for assistance! Thank you!

[Dave Foster]

@Byron Bohlsen, Your QI will have to agree.  But I think you can have both the ease of entry on the Sched E and keep your 45 day list under 4 properties.

If those 4 properties are being purchased from one seller under one contract with one closing you could treat that as a portfolio and all 4 individual units could be treated as one for purpose of identifying them for your 1031.  Be warned that if you do that the portfolio is the identification.  You will have to purchase all of the units to validate that identification.  You can't cherry pick and only buy 3 of the 4.  It will be all or nothing.

But that would keep you under the 4 property identification.  And you can still break them out as individual properties for purposes of the Sched E which is probably more appropriate anyway given the individual parcel IDs.