Can I use 1031 to invest in syndication?

5 Replies

    What if you wanted to take the capital gains from a investment property (title held personally) and put it into a syndication as a passive investor? Could you contribute the cap gains to the LLC and have that LLC be the member of the multi-member syndication?

@Farrukh Madaminov, Nope that won't work in 1031 world.  The taxpayer for the old property has to be the same as for the new property.  When you invest in an LP syndication the LP is the taxpayer or owner for the new property.  That changes the tax payer so it does not qualify.

If the syndication is set up so that you can take title as a tenant in common with the LP that would qualify.

@Farrukh Madaminov

Here is what I know from my own investing/research, make sure you confirm:

1. You can do TIC with someone else, maybe a partner who wants to be active. Syndications are not usually TIC. I've done a TIC w one partner when I had a 1031 and he didn't

2. Invest the money into a QOZ. With a 10 year hold you’ll pay 85% of the taxes you have on your current gain but the proceeds will be tax free. So this allows you to go passive. I’m setting one of these up now. Makes a lot of sense in the right situation.

3. DST. These are setup so you're on title so works for a 1031. I've never done this so am least familiar with how this works.