Avoid This Common 1031 Exchange Error

One common scenario I see in my work as a qualified intermediary is property subject to a #1031 exchange being held by co-owners. The type of ownership varies from transaction to transaction. For example, some relinquished properties are owned by spouses in their individual capacity. Others are owned by LLCs. Such ownership structures are fine for a 1031 exchange, so long as one rule is followed.

Each person with an ownership interest must sign off on all exchange-related documentation. This includes the all-important exchange agreement and any identification forms.

This means that even in LLC scenarios, where one co-owner may have authority to sign for the group of co-owners, all co-owners should sign off on every exchange document. Failing to obtain every signature exposes the entire exchange to potential invalidation by the IRS.

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