‘Can I do a 1031 exchange in a Regulation D syndication?’
Syndication Law & The Private Placement Memorandum Attorney
Challenges and Risks of Using a 1031 Exchange in a Syndication
Exploring the difficulties and potential obstacles of using a syndication structure in a 1031 exchange, including the challenges of involving investors as tenants in common and the complications that arise when some investors want to opt out.
Tilden Moschetti, of the Moschetti Syndication Law Group, addresses two questions related to 1031 Exchanges and syndication.
*Can investors doing a 1031 exchange be incorporated into a syndication?*
Yes, this is possible but complex. Investors could enter the syndication as a tenant in common as part of their 1031 exchange. However, each tenant in common can vote on property decisions and may not wish to sell when the syndication intends to exit, potentially posing a challenge. Additionally, this investor would have to sign all loan documents along with the syndicator, adding another layer of complexity.
*Can a syndication perform a 1031 Exchange out of the property?*
Yes, but there are certain conditions. If all investors agree to proceed with the 1031 exchange from one property to another, this can be achieved fairly straightforwardly. However, if some investors wish to exit the syndication during this exchange, complications may arise, especially if the property is located in a state with aggressive tax authorities like California's Franchise Tax Board. If all investors reside in a state that is more accepting of this, the issue can be avoided.
Moschetti suggests that investors be cautious when blending 1031 Exchanges and syndications due to these potential complications and seek expert guidance when necessary.
If you are ready to schedule a free consultation with an attorney for your syndication, go to https://www.moschettilaw.com/schedule-a-consultation/.
Read more about Real Estate Syndication - How to Syndicate Real Estate: https://www.moschettilaw.com/how-to-syndicate-real-estate/
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Moschetti Syndication Law Group is a boutique syndication law firm, serving small and growth-bound syndicators, and well as private equity firms. We keep our firm ‘boutique’ size so we can tailor the services to each client’s unique needs without turning the firm into a faceless factory or passing unnecessary overhead expenses onto our clients. (As our client, you’ll only pay a fixed fee, so no surprises.) As for the client experience, we give real-time answers without making you book an official appointment. And we’ll work with your ambitions and overall vision to help you close the current deal and fill-in that ‘missing’ piece - whatever you need - to keep adding more syndications to your portfolio. We keep syndicators syndicating (TM).
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