When completing a 1031 exchange, not all real estate interests are created equal. Our Team breaks down a key compliance issue: the difference between acquiring a real property interest versus a partnership interest.

While a tenancy in common (TIC) ownership structure may qualify for 1031 treatment, an interest in a partnership—even one that owns real estate—does not meet the like-kind requirement. A 2022 decision from the Second Circuit Court of Appeals (Gluck v. Commissioner), on appeal from the U.S. Tax Court, illustrates this distinction, where taxpayers believed they had acquired real estate but had, in fact, purchased a business interest—triggering over $1.5 million in taxes.

This case is a cautionary tale that highlights the importance of verifying how the ownership is structured and reported—beyond just how it’s titled.

Read the full article to learn how to identify qualifying replacement property and protect your exchange from unintended tax consequences.