1031 Exchange Ownership Question

1 Reply


My wife and I jointly own a rental property that we report on our Schedule E. We want to sell the property, and use the funds to buy another property with multiple other investors. From what I am reading, this may be an issue with the "same taxpayer rule." Can anyone advise?

@Jeremy Macfie , it all depends on how you take title.  You and your wife will need to take title to at least as much real estate as you sell if you want to avoid all tax in a 1031.  But you don't have to take title to more and you don't have to take title to the whole thing.  You could purchase with the other investors as tenants in common.

If you're selling your property for $200K you must take title to investment real estate worth at least $200K.  That could be a stand alone building for $200K or two small $100K buildings, or 20% of a building that costs $1 mil.  If you had 4 other investors wanting to go in on the same building you could each take title to 20% of the actual building.  As long as you're purchasing an actual deeded interest in the property itself.

What won't work is if you are wanting to purchase membership interest in or shares of a partnership that owns a building - like most syndications.  That will not qualify because you're not buying real estate.  You're buying a company that owns real estate.