What all qualifies for a 1031 Exchange?

Question

My partners are currently in a situation where they have cash they need to spend by the end of the year from a previous partnership of theirs that was dissolved. Our question is do they have to spend the money on the purchase of a new property? Or can they invest in in our current properties? Thanks!

Dave Foster · Answer

@Ethan Cole, The post heading said 1031.  But I don't think you've got a 1031 happening here.  A 1031 exchange is a process that involves the sale of investment real estate and the purchase of new investment real estate.  The dissolution of a partnership would not be considered a sale.

I spose it's a different question of the partnership was dissolved, the real estate sold, and their in the middle of a 1031 being performed by a Qualified intermediary.  In that case it would depend on the entity that you're involved in that owns the property.  If they owned their properties as tenants in common or single tenants.  And if your properties are in an entity that they do not own more than 50% of then it is probably not a related party to them and what you suggest might be a possibility for them to purchase %s of the real estate to be held as tenants in common with your entity.

Bill B. · Answer

I don’t think your talking 1031 exchanges. I don’t believe partnerships qualify. They certainly couldn’t have control of the money and they would only have 45 days from date of sale if they did qualify. They also cannot “invest” in properties they already own.

Michael Plante · Answer

Interesting

What all qualifies for a 1031 Exchange?

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