There may come a time when partners owning real estate in many commonly owned partnerships or limited liability companies taxed as partnerships wish to divide up the properties and go their separate ways. The more well-known technique of “drop and swap” involving exchanges of tenancy in common interests presents many challenges. In this article, the authors explain alternative Mixing Bowl Technique. They also challenge the common wisdom that partners wishing to divide up a real estate portfolio through a “mixing bowl” strategy need to wait 7 years before being able to go their separate ways.
The authors conclude that in many instances the partners could separate after only 2 years using the mixing bowl strategy. This shorter holding period makes the mixing bowl partnership a viable alternative to the drop and swap technique.