Divorce and 1031s

A H/W in the middle of a 1031 EXCHANGE decide to divorce. If only one party completes the exchange, the other will be taxed on half the gain. The parties can purchase 2 properties and allocate one to each, resulting in both saving taxes. If one party wishes to assign the rights to the funds to the other party as part of a Settlement Agreement or receive the funds from the Intermediary, they cannot do so without terminating the exchange. The options are different if the divorce occurs prior to or after the exchange.