Can I 1031 into a TIC property co-owned with my adult children?

Buying alongside your children is not an exchange with them

Section 1031(f)(1) is triggered when 'a taxpayer exchanges property with a related person.' Your adult children are related: section 1031(f)(3) points to section 267(b), and section 267(c)(4) defines family as brothers and sisters, spouse, ancestors and lineal descendants. The full list is in who counts as a related party.

But the rule is about the other side of your exchange, not about who shares the deed with you. If you sell a rental to a stranger and your intermediary buys a 60 percent undivided interest in a building from another stranger, while your two children buy 20 percent each with their own money at the same closing, you have exchanged nothing with them.

The same logic sets the Form 8824 answer: line 7 asks whether the exchange of the property given up or received was made with a related party, directly or indirectly. For this structure the answer is No. What that line covers when it is Yes is explained in the related-party section of Form 8824.

The rule bites when a child is the seller or later swaps with you

If your children already own the building and sell you a share for cash, that cash-for-property trade through your intermediary is the pattern in Rev. Rul. 2002-83: a taxpayer who receives replacement property formerly owned by a related party is denied nonrecognition if the related party receives cash for it. The full treatment is in buying replacement property from a relative.

A later swap is the second trap. If you trade your interest in one property for a child's interest in another, that is an exchange with a related person, and the two-year rule then binds both of you.

A child also cannot hold your money. Reg. section 1.1031(k)-1(k)(3) makes a person bearing a section 267(b) relationship to you a disqualified person, so the intermediary has to be unrelated.

Keep it co-ownership, because a family partnership interest is not real property

Reg. section 301.7701-1(a)(2) says 'mere co-ownership of property that is maintained, kept in repair, and rented or leased does not constitute a separate entity,' but co-owners who lease space and also provide services to occupants can create one. If the family arrangement becomes a partnership, you own a partnership interest, and section 1031 does not reach it.

The IRS's ruling guidelines for tenancy-in-common deals in Rev. Proc. 2002-22 are not substantive rules, by their own terms, but they show what the IRS looks for: title held as tenants in common under local law, no partnership return or common business name, revenues and costs shared in proportion to each undivided interest, and blanket-lien debt shared the same way.

In practice that means separate deeds or one deed naming each owner's percentage, a written co-ownership agreement, a bank account in which each owner's share of rent and costs is tracked, and each owner reporting their share on their own return.

Worked example: a $1,200,000 duplex split three ways

Hypothetical, round numbers; run your own numbers with your CPA. You sell a rental for $800,000 with no debt, and your intermediary holds $800,000. You, your daughter and your son buy a $1,200,000 duplex from an unrelated seller with no mortgage: your intermediary closes on a two-thirds interest for $800,000, and each child brings $200,000 for a one-sixth interest.

Your exchange is complete and fully deferred, because you received real property for all of your proceeds and took on no boot. Your children are ordinary buyers with a cost basis of $200,000 each.

Now change one fact: your son has only $150,000 and you cover the other $50,000 from savings. That $50,000 is a gift to him. The Form 709 instructions generally require a gift tax return when gifts to one person exceed the annual exclusion, which the IRS gift tax FAQ lists at $19,000 for 2026, with the excess counted against the $15,000,000 basic exclusion for 2026.

• Your share: two-thirds, basis carried over from the old rental.
• Each child: one-sixth, cost basis, no exchange involved.
• Rent, expenses and depreciation: split two-thirds, one-sixth, one-sixth.

What to agree in writing before the closing

Put the percentages in the purchase contract and the deed, and make sure the intermediary is buying only your share. Agree who decides on leases, repairs and a sale, and how a co-owner who wants out is bought at fair market value.

Think about the exit now. A later sale of your share to a child at a loss produces no deduction under section 267(a)(1), and a sale at a gain is fully taxable unless you exchange again. If succession is the real goal, compare holding until death in 1031 versus holding for a step-up.

Finally, decide what happens if a child divorces, dies or cannot pay their share of a repair. Each co-owner's interest can be transferred or encumbered by that owner, so the agreement should give the others a right of first offer at fair market value rather than a veto.

Where a trust interest is simpler than a family deed

Some families want the shared investment without shared management. Each family member can buy a separate beneficial interest in the same Delaware statutory trust, the trust owns and manages the property, and no co-ownership agreement among relatives is needed. Your interest is acquired with exchange funds; theirs with their own cash.

That route removes the partnership question and the day-to-day decisions, but it also removes control, and the interests are illiquid with capital at risk. See what you own in a DST and DSTs in estate planning.

When the trust sells, each family member receives their own share of the proceeds and decides separately whether to exchange again.