Sometimes a situation arises when real property owned by a corporation has certain shareholders wanting to perform a section 1031 exchange and other shareholders wanting to cash out.

A Private Letter Ruling from the IRS shows how to grant the wishes of all shareholders (PLR 2000-12064)

    The corporation establishes a wholly owned subsidiary.

The corporation transfers a fractional interest in the real property to the subsidiary.

(The fractional interest transferred is determined by the percentage ownership in the corporation of the shareholders wishing to perform the exchange.)

The corporation transfers 100% of the subsidiary's stock to the shareholders wishing to do the exchange. 

In exchange for their shares in the corporation. the shareholders wishing to do the exchange now own 100% of the subsidiary's stock and none of the corporation's stock.                      

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  1031 Corporate Split Ups

  The Business of Solving Real Estate Problems

             Real Estate Exchanging

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