Exchange Structures
Seattle Portfolio Fractional Exchange
A tenancy-in-common structure lets multiple exchangers, or a single exchanger and other investors, each hold an undivided fractional interest in one larger property, which opens access to institutional-grade assets that would be out of reach for a single 1031 investor's proceeds. We design tenancy-in-common and fractional ownership strategies with governance, cash flow, and exit planning for Seattle, WA investors, keeping the structure carefully separated from a partnership interest, which does not qualify for exchange treatment.
What You Get
Key Outcomes
Define governance frameworks and decision rights that respect the tenancy-in-common structure's requirements
Align cash distribution policies among co-owners before closing, not after a dispute arises
Plan orderly exit mechanisms and buy-sell provisions in case one co-owner wants to sell later
Confirm the structure avoids characteristics the IRS treats as an association taxable as a corporation
Deliverables
What We Deliver
- Governance charter documentation addressing major decisions and day-to-day management authority
- A distribution waterfall model showing each co-owner's share of income and proceeds
- An exit scenario briefing covering buyout mechanics and right of first refusal provisions
- A structuring memo addressing the specific IRS guidelines for qualifying tenancy-in-common exchanges
Process
Execution Timeline
Week 1: Collect each investor's objectives, contribution amount, and risk tolerance
Week 2: Draft governance and cash distribution structures for the group
Week 3: Prepare identification support materials reflecting the fractional structure
Week 5: Finalize closing documentation for each co-owner ahead of the deadline
Common Questions
Frequently Asked
Can tenancy-in-common interests qualify for a 1031 exchange in Seattle, WA?
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Yes. A tenancy-in-common interest can qualify as like-kind real property when it is structured correctly, generally following the guidelines described in Revenue Procedure 2002-22, which limits the number of co-owners and restricts certain partnership-like features. We coordinate closely with legal counsel to make sure a Seattle, WA tenancy-in-common structure stays on the correct side of that line.
How do you handle decision making among multiple co-owners?
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We document voting thresholds for major decisions, day-to-day management roles, and a dispute resolution process so every investor understands their rights from the outset, since unclear governance is one of the more common sources of friction in a multi-owner property later in the hold period.
Do you model cash distributions?
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Yes. We build distribution models showing each co-owner's proportional share of income and eventual sale proceeds under multiple scenarios, along with any agreed reserve policy for capital expenditures, so distributions are predictable rather than negotiated informally each time a payment is due.
What is the difference between a tenancy-in-common interest and an LLC or partnership interest for exchange purposes?
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A tenancy-in-common interest is direct ownership of an undivided fractional share of real property, which is treated as real property eligible for a 1031 exchange. An interest in a partnership or an LLC taxed as a partnership is treated as personal property, an interest in the entity rather than in the underlying real estate, and generally does not qualify, even though the entity itself owns real property. This distinction is one of the most common areas of confusion for exchangers considering a co-ownership structure.
How many co-owners can a qualifying tenancy-in-common structure have?
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Revenue Procedure 2002-22 describes a safe harbor limiting a qualifying tenancy-in-common arrangement to no more than thirty-five co-owners, along with other restrictions on management authority and unanimous consent requirements for certain major decisions. Falling outside those guidelines does not automatically disqualify the structure, but it removes the safe harbor protection and increases audit risk, so we structure toward the safe harbor whenever possible.
Can I later exchange out of a tenancy-in-common interest into a wholly owned property?
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Yes. A properly structured tenancy-in-common interest is real property, so it can itself be exchanged again into a wholly owned replacement property, another fractional interest, or a DST interest, subject to the same forty-five and one hundred eighty day rules that apply to any other 1031 exchange.
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