1031 exchange

[Kram BergGold]

My client and his wife own a rental property through a nominee trust. He wants to do a 1031 exchange but have the new property titled as an LLC. The 1031 exchange company says this is not permitted. I have never seen anything on this point. Any comments?

[Bees Knees]

Why not leave the LLC out of it and after the 1031 exchange is complete, contribute the newly acquired property to an LLC?

[JAinNC]

My client and his wife own a rental property through a nominee trust. He wants to do a 1031 exchange but have the new property titled as an LLC. The 1031 exchange company says this is not permitted. I have never seen anything on this point. Any comments?

Whatever name the exchange property is in (example ABC Inc ), the acquired property must end up in the same name to be a 1031 exchange.

[Kram BergGold]

Bees?

My original thought was, if he titles the replacement property the same as the old property, then he should wait awhile before changing to LLC. From your post I take it you don't think that is necessary. Is my reaqding of your answer correct?

[wexeter]

Disregarded Entities

I am assuming that the trust you are referring to is something similar to the Illinois Land Trust, in which case it would be considered a disregarded entity. And, I am assuming that the property to be acquired would be acquired in the name of a single member limited liability company where the taxpayer that was the beneficiary of the trust would be the sole member of the LLC so that the LLC would also be considered a disregarded entity. If my assumptions are correct, it would qualify for 1031 exchange treatment because both entities are disregarded and the same taxpayer is the underlying investor.

I would of course be cleaner to keep the exact same entity for the relinquished property and the replacement property (less to explain under audit, but the transaction as proposed would qualify for 1031 exchange treatment.