How can partnership property be exchanged?

If a property is owned by a formal partnership that files 1065s, the partnership can do a 1031 exchange.  This works out fine if the partnership is going to continue and the partners agree on owning the new replacement property.

It becomes trickier if the partnership is being dissolved or the partners want to do different things with their shares of the proceeds.  If that is the case, and you do want to do a 1031 for your share, you need to have title to your percentage of the property transferred into your personal name prior to its sale.  This transfer is considered a tax free capital distribution, with no tax consequences as long as the cost basis of the property remains the same on your books as it was on the 1065 for the partnership. 

When the property is sold, your share of the proceeds would then be eligible for a 1031 exchange, as long as you follow the normal rules.  What your former partner does with his/her share of the proceeds is no longer any concern of yours.  

This is a very common type of transaction and most escrow companies are skilled at doing the title changes.  Normally, it's done on the same day as the sale; but that's up to you.

If someone is going to buy your share in the partnership, that is not eligible for a 1031 exchange because sales of partnership interests are considered to be sales of personal property, just like selling stocks.
 

What you need to do first clear up the issue of the actual ownership.  If it is just jointly owned, with your and your co-owners' individual names on the title, nothing special needs to be done. You can do a 1031 exchange with your share of the proceeds.  The other owners can do whatever they want with their shares of the proceeds.

If, on the other hand, the property's title is the name of a partnership entity, such as "ABC Properties," and the partnership is not planning to do a 1031 exchange for the entire proceeds, your share will have to be transferred into your personal name.  The escrow company can draw up the deed from the partnership to you for your percentage.  It's done all the time.

This isn't very complicated.  Any CPA or tax attorney with experience in 1031s and partnership taxation should be able to advise on this with no problem. 

As with any 1031 exchange, it has to be set up as such before hand.  The cash proceeds must be sent directly to the new replacement property or into the accommodator's trust account.  If you have direct constructive receipt of the cash, it is a taxable sale, regardless of what you do with the money