{"id":27276,"date":"2020-08-12T13:57:27","date_gmt":"2020-08-12T17:57:27","guid":{"rendered":"https:\/\/www.affiliated1031.com\/can-one-tenant-in-common-opt-for-a-1031-exchange\/"},"modified":"2020-08-12T13:57:27","modified_gmt":"2020-08-12T17:57:27","slug":"can-one-tenant-in-common-opt-for-a-1031-exchange","status":"publish","type":"post","link":"https:\/\/www.affiliated1031.com\/es\/can-one-tenant-in-common-opt-for-a-1031-exchange\/","title":{"rendered":"CAN ONE TENANT IN COMMON OPT FOR A 1031 EXCHANGE?"},"content":{"rendered":"<div  class=\"tatsu-h6usz49r6qe6maw0 tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-h6usz49r89476daf\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-h6usz49r9mbcktsr\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-h6usz49rau63e2ur  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-h6usz49rau63e2ur.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;padding: 25px 0px 0px 0px;}<\/style><h2>What happens if two\u00a0or more taxpayers own property together, as tenants in common, and decide that they want to go their separate ways?<\/h2>\n<p>Additionally, what happens if one of the taxpayers decides they want to do a <strong><a title=\"Link to IRS 1031 Exchange Definition\" href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/like-kind-exchanges-real-estate-tax-tips\" target=\"_blank\" rel=\"noopener noreferrer\">1031 Exchange<\/a><\/strong> and the other owner, decides it wants to just receive its share of the proceeds and pay its tax?<\/p>\n<p>Before we get to answering the above questions, we need through some definitions.<\/p>\n<p><strong>Partition\u00a0<\/strong>is defined as dividing an interest into different parts.<\/p>\n<p><strong>Tenants in common<\/strong>\u00a0are defined as ownership by two or more people, where the share of ownership may be unequal;\u00a0 and each owner can freely transfer its interest of ownership to others, during their lifetime and\/or through a will.<\/p>\n<p>That means that any of the owners can dispose of its interests to whomever they wish while they are alive or leave their ownership interests to their heirs.\u00a0 There is no \u201cright of survivorship\u201d going to the other owners.<\/p>\n<p>Sounds very technical.\u00a0 Let me give you a couple of examples that I believe will help simplify and educate at the same time.<\/p>\n<p><strong>EXAMPLE #1<\/strong>:\u00a0\u00a0 X, Y, &amp; Z each own an undivided 1\/3 interest in an investment piece of real estate together as Tenants in Common.\u00a0 They no longer want to own property together; they find a buyer for the property they own together and then each finds a property they would like to own 100% of by themselves.<\/p>\n<p><strong>Question:<\/strong>\u00a0 Can X, Y, &amp; Z, sell the property they jointly own and each do their own separate 1031 tax-deferred exchange, resulting in each of them deferring taxes on their taxable gain?<\/p>\n<p><strong>Answer:\u00a0<\/strong>\u00a0Yes, they can.\u00a0 But they must still satisfy 3 requirements:\u00a0<strong>(1) there must be an exchange;<\/strong>\u00a0<strong>(2) the real estate exchanged must be like-kind; and<\/strong>\u00a0<strong>(3) the properties must be held for the productive use in a trade or business or for investment.\u00a0<\/strong><\/p>\n<p>The result is that X can accomplish a valid Section 1031 exchange by obtaining its own separate <strong><a title=\"Link to definition of 1031 Exchange Replacement Property\" href=\"https:\/\/liberty1031.com\/everything-you-need-to-know-about-1031-property-identification-2\/\" target=\"_blank\" rel=\"noopener noreferrer\">Replacement Property<\/a><\/strong>; Y can accomplish a valid Section 1031 exchange by obtaining its own separate Replacement Property and Z can accomplish a valid Section 1031 exchange by obtaining its own separate Replacement Property.\u00a0 They no longer are forced to own property together.<\/p>\n<p>Let me give you another example of a partition of a Tenants in Common property.<\/p>\n<p><strong>EXAMPLE #2:<\/strong>\u00a0 Similar factual pattern.\u00a0 X, Y &amp; Z each own an undivided 1\/3 interest in an investment piece of real estate as Tenants-in-common.\u00a0 They no longer want to own property together.\u00a0 They find a buyer for the property they own together.\u00a0 X and Y each want to do a Section 1031 Tax Deferred exchange and each finds their own Replacement Property they would like to own by themselves.\u00a0\u00a0 Z would like to just cash out and pay its taxes.<\/p>\n<p><strong>Question:<\/strong>\u00a0 Can X and Y separately do a Section 1031 Exchange, obtaining their own Replacement property and Z receive its proceeds and then pay its taxes?<\/p>\n<p><strong>Answer:<\/strong>\u00a0 Yes, this also can be accomplished.\u00a0 Both X &amp; Y must still satisfy the 3 requirements mentioned above and Z, upon receiving its payout would then be responsible for payment of any taxes due on its individual ownership of the Relinquished Property.\u00a0 This works because the parties held their interests as Tenants in Common, not as an interest in a partnership or corporation.<\/p>\n<p><em>One final comment:\u00a0 It is ALWAYS advisable that the Taxpayer speaks with their Legal and Financial counsel whenever dealing with an involuntary conversion.\u00a0 Liberty 1031 LLC looks forward to working with you on future Section 1031 transactions.<\/em><\/p>\n<p>I personally look forward to working with you on your next Section 1031 exchange.\u00a0 <\/p><\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-h6usz49r9mbcktsr.tatsu-column{width: 100%;}.tatsu-h6usz49r9mbcktsr.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-h6usz49r9mbcktsr > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-h6usz49r9mbcktsr > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6usz49r9mbcktsr > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-h6usz49r9mbcktsr > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-section-overlay\"><\/div><style>.tatsu-h6usz49r6qe6maw0 .tatsu-section-pad{padding: 15px 0px 15px 0px;}.tatsu-h6usz49r6qe6maw0 > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6usz49r6qe6maw0 > .tatsu-top-divider{z-index: 9999;}.tatsu-h6usz49r6qe6maw0 .tatsu-section-overlay{mix-blend-mode: normal;}<\/style><\/div><!-- \/wp:post-content -->","protected":false},"excerpt":{"rendered":"<p>What happens if two or more taxpayers own property together, as tenants in common, and decide that they want to go their separate ways? <\/p>\n<div><a href=\"https:\/\/www.affiliated1031.com\/es\/can-one-tenant-in-common-opt-for-a-1031-exchange\/\" class=\"exp-read-more exp-read-more-underlined\">Read More<\/a><\/div>\n","protected":false},"author":1,"featured_media":26958,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[57],"tags":[58,59,62,60,61],"class_list":["post-27276","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1031-exchange-basics-es","tag-1031-exchange-es","tag-liberty-1031-es","tag-qualified-intermediary-es","tag-section-1031-exchange-es","tag-tax-deferral-es"],"_links":{"self":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27276","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/comments?post=27276"}],"version-history":[{"count":0,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27276\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media\/26958"}],"wp:attachment":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media?parent=27276"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/categories?post=27276"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/tags?post=27276"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}