Can LLCs do 1031s...?

Believe it or not, we get asked this question frequently. And the answer is absolutely YES! If you are a “taxpayer,” you are eligible for a 1031 exchange. This includes individuals, LLCs, partnerships, corporations, trusts, or any other legal entity you can think of.

Of course, just because you are a taxpayer, it doesn’t automatically mean you can do an exchange.

For instance you cannot sell your shares in a c-corporation (even if the c-corp only owns real estate) and then use the money to buy real estate. Shares are not “like-kind” to real estate. Neither are membership interests or partnership interests.

On the other hand, if you sell business or investment real estate, all you have to do is buy other business or investment real estate. A piece of land almost always qualifies for a 1031 exchange, and can be exchanged for a rental house, apartment building, commercial property, or any other real estate you hold primarily for business or investment.

The bottom line is that your ownership entity should have zero bearing on whether you can do a 1031 exchange if you are exchanging real estate for real estate.

--The Experts