Creating & Dissolving a Partnership

Present Condition – Robert and Jose have formed an LLC to purchase investment property.  They buy a 12 unit apartment building, they rehab the property, allowing them to raise the rents and quickly increase the value.  They decided to sell the property and list it with a realtor, who shortly presents them with the prospect of buying a waterfront condominium.  

Present Position  – Robert is very interested in the waterfront condominium, but Jose is looking in another direction. 
Robert needs to do a 1031 exchange to avoid the capital gains tax, which would allow him to have enough cash to close the deal. 
He cannot do a 1031 exchange of a partnership interest. 

Resolution – Robert and Jose decided to dissolve the partnership and deed the property to each other, which allowed each of them to qualify for doing a 1031 exchange. 

Benefit to Partners – Forming the partnership allowed Robert and Jose to purchase the apartment and rehab the property. 
Dissolving the partnership allowed each of them to take advantage of the
                                                           1031 Exchange rules.


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