Structuring a Partnership for 1031 Exchange

[Jason Kahan]

I have bought 2 long term rental properties with my brother. I am on one loan and title, he is on the other. We have a separate contract stating we are 50/50 owners. Will we be able to 1031 exhange when we sell the properties?

Going forward, what is the best way to structure the partnership so we can 1031 exchange in the future?

Thank you!

[Jackson Hanssen]

If you're both 50/50 in each asset, why not create a partnership now, and contribute both assets to the partnership; where you will be 50/50 owners. Then the partnership can be on title as the owner of both current properties and then the partnership can be the consistent taxpayer for a clean 1031 exchange. A partnership can do 1031's indefinitely, so no issues with 1031s in the future if you go this route. 

I think you've reached a point that is common with entrepreneurs of any industry. You got your business off the ground in an awkward and unsophisticated way, because starting is hard. Now that you've had some success it is a good idea to clean up the structure of the business and continue forward on your chosen path.