Real Property Law

Cal. Real. Prop. Journal 2016, VOL. 34, NO. 1

MCLE Self Study Article: 1031 Exchanges and Real Estate Partnerships—Swaps, Drops, PINs, and Rago

Check the end of this article for information on how to access one MCLE self-study credit.

William F. Webster

William F. Webster is a sole practitioner in Roseville, California. His practice is primarily in the areas of business transactions and entity formation involving tax and securities laws, and estate planning. Prior to opening his own firm, Mr. Webster was in-house counsel at a 1031 exchange qualified intermediary. Mr. Webster can be reached at

Tax-deferred exchanges under section 1031 of the Internal Revenue Code ("IRC") ("Section 1031") are a regular feature of the real estate landscape. One aspect that has gotten particular attention is an exchange of property by a partnership or LLC1 in which various partners may have differing ideas about what they want to do going forward, and some partners may want to leave the partnership altogether and do separate exchanges. This article briefly reviews Section 1031 basics and then focuses on various exchange techniques used by partnerships and partners, including "drops and swaps" and related transactions, and the use of a partnership installment note ("PIN"). The article concludes with an examination of the recent California State Board of Equalization opinion in Appeal of Rago Development Corp. 2 and its ramifications for partnership exchanges in California.

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