In a 1031 exchange, can I sell a property in my own name and purchase in a trust or an LLC?
It depends. A basic premise of 1031 exchange is that the taxpayer who sells relinquished property must be the same taxpayer who buys replacement property. This usually means that the vesting is the same for both the relinquished and the replacement properties. For example, John Doe's name is on title to both properties involved in the 1031 Exchange.
However, there may be times when the party involved in the exchange would like to make a change in how the replacement property is held. For example, John Doe is on title to the relinquished property, but would like to take title to the replacement property in an LLC.
This is only allowable if the LLC is treated as a pass through entity, disregarded for tax purposes. The tax ID for the LLC will be the taxpayers social security number and there will be no need to file a separate return for the LLC.
This works for an LLC, but also for a revocable living trust, since living trusts are also pass through entities for tax purposes.
The rule of thumb regarding a 1031 Exchange is to maintain the same taxpayer. The taxpayer who sells relinquished property needs to be the same taxpayer who buys replacement property, regardless of the vesting.
Of course, if you have questions regarding how to hold title in an exchange please contact us directly at 877-471-1031.