Posted by Frank Chin on March 03, 2004 at 05:46:00:
DGT:
I was waiting for an answer to this one, but as no one responded, I’ll give it a crack.
I’m not an attorney, but thinking out loud on a simple solution. The problem as I see it, is the 1031 exchange requires the “same name” on the titles for the relinguished property and on the replacement properties.
It appears splitting the ownership, and selling two pieces separately would simplify things.
One way is to physically split the 20 acres, but that would involve the time and effort to subdivide, allocate the partnership, and retitle.
A simpler way is to divide the “ownership interest” into TWO, via a “fee simple” ownership interest, and a “long term leasehold”. You’ll form two new LLC’s, with the origninal LLC distributing the interest to the two new ones, and each partner being the new owner of one of the new entities, one holding the “deed”, and the other the “leasehold”, which each piece allocated half of the value.
The seller would then buy the two separate pieces, and upon its purchase, merge the interest of the two. This way, each owner can dispose of his part in his own way. The “deed” interest, and the “leasehold” both qualifies for 1031 treatment.
You’ll probably need an attorney to draw up the paperwork to split the interest, and he can probably advise if there’s a simpler way of accomplishing this.
Frank Chin