1031 Exchange with Partner?

Question

Through my divorced, I ended with about $80K from the sale of our rental property. It's in a 1031 exchange with an  intermediary. Can I invest it with another partner if we buy a new property valued at $190K as long as my portion is $80K or more? Both our names would be on the deed.

Craig Orput · Answer

Dave,

thanks for the info. That was very helpful. Unfortunately, I left out an important piece of information possibly. My partner currently owns the town home. So I was going to buy into the townhome and then we are going to convert it to a rental. My QI hasn't really answered my question. I'm wondering if she doesn't have much experience in this area as it's not a common situation. I would think it would be possible to do a joint tenants in common even though it's currently owned by my partner period wouldn't that just be the way the title and paperwork is set up? I'm going to call my QI again.

Dave Foster · Answer

@Craig Orput, Unfortunately it's all up to your QI now.  Filling in forms is easy until something goes south.  Hopefully you won't pay for their inexperience.  A lot depends on the relationship of you and your partner.  If they would not be considered a related party then you could indeed purchase a tenant in common % of the property to satisfy your 1031.

Jon Taylor · Answer

@Craig Orput

Dave's right, the TIC structure is the way to hold fractional ownership in a real estate venture with the ability to go your separate ways upon the exit of the project.

Dave Foster · Answer

@Craig Orput, The tax payer needs to be consistent through the 1031.  So if you are the seller (via the divorce decree), then you need to be the buyer.  So as long as you are buying as tenants in common with your partner that would be fine.  Hopefully that's what your QI said as well.