1031 question co-ownership

Rental Property Investor · St Augustine, FL · Member since 2019 · 264 posts · 279 votes

Co own two properties with sister. We plan to sell one unit at the next vacancy. Can I do a 1031 exchange and buy her out of the second unit with the proceeds received. These are identical properties (condos) same pricing

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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
4y
@Fred Cannon you should connect with @Lauren Speidel. She has helped me with quite a few of these trickier issues when dealing with exchanges and partnerships.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y
@Fred Cannon, If you're both on the deed then you can certainly 1031 your portion anywhere you want. the potential issue with you is that this is a related party. And the iRS has made it very clear that they are suspicious transactions where the exchanger is buying from a related party. It's not that it is statutorily prohibited. But they almost always will disallow an exchange where they see this because it is seen as a form of basis shifting (which it is). But that being said, there are many accountants out there who will let you do it as long as it is very tightly documented as an arms length business like transaction.
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