Loan Structure question - 1031/family partnership
I am representing a family in a 1031 deal.  They are purchasing a building for 3.3m.  At PA stage. 

They will exit relinquished property with 3m and will put entire amount into this building.  The 300k gap here one of the family members will loan to the partnership because they want zero debt.   

How should this 300K loan be structured in your opinion?  Would they do a promissory note for 300K?  And thoughts on interest rate?    

There are 2 siblings involved 50/50 ownership.  Since the 300K is going to equity of the building, does sibling A only have to pay back lender (sibling B) 150K?  That is where I am a bit confused. 

Please note they don't want to lever up right now.  They have valid reasons for this.  Believe me I would have loved for them to go after a 12M asset so please no advice on that end of this.  

Thanks everyone.
[{"id": "fin5qzq", "text": "How is the property titled? In their individual names jointly or in an LLC? An operating agreement often has provisions that deal with how loans from one member are treated. Two simple ways to treat it if there is nothing already addressing it: (1) as a senior loan and split the remainder 50/50 (just like traditional debt service) or (2) as a priority loan, and all cash flow is paid toward the reduction of the outstanding balance, and then split 50/50 after payoff.", "replies": [{"id": "fin6l9u", "text": "Ownership structure will be LLC, yes.  No operating agreement structured yet.  \n\nThanks for info.", "replies": [], "depth": 2}], "depth": 1}, {"id": "finwwkx", "text": "Don\u2019t 1031s have to stay in the same legal structure? Ie you won\u2019t be able to roll a 1031 from one partnership to a new LLC.\n\nAnd defer to the partnership agreement, if it exists. If none, then a formal note and deed of trust(if applicable), with fairly standard terms. Would definitely get a 1031 accomadator or lawyer involved to ensure there are no issues transferring $3M. A screw up on the transfer would cost a bundle.", "replies": [{"id": "finyr5j", "text": "Yes replacement property needs to be acquired using same form of ownership as relinquished property.  In this case undivided interest form, I believe.  Sale proceeds can't go directly to a partnership or a multiple owner LLC.  So the new entity must be owned as undivided tenants in common, or each owner could own undivided interest in single member llc.  Then tehcoma they would form an LLC during DD that would be the management company (LLC).  \n\nThis was all taught to me by their lawyer of course, I am just paraphrasing so lets be clear on that:).  \n\nBut I learned on this deal that even if you have multiple partners on an asset, say 4 for example, that 4 person partnership could sell an asset, and 1, 2 or 3 of them if they so desired could 1031 their own portion of proceeds.  Very confusing and need to consult a good lawyer, but can be done.", "replies": [{"id": "finzwpe", "text": "Yes, all of that makes sense. You didn\u2019t provide this level of detail in the initial post, thus my concern. 1031s are great, but miss the timelines or transfer inappropriately and your client gets a nice big tax burden - which honestly isn\u2019t a bad thing if we are going into a rising tax rate environment.\n\nNot a lawyer or CPA.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]