What to Know About 1031 Exchanges of Disregarded Entities

1031 Exchange Disregarded Entities

Can I buy a 1031 exchange property in a trust, LLC, or other entity that is considered to be a disregarded entity?

Disregarded Entities

The nice thing about disregarded entities is that they are pass-through, flow-through entities. It’s as if the taxpayer that wholly owns the LLC or other entity is the actual owner of the property for tax purposes.

That means that if you own the relinquished property in a trust or LLC or other entity that is wholly owned by you and effectively you are the owner of it for tax purposes, you as an individual can acquire the replacement property to complete your 1031 exchange, either in your own individual name or a new disregarded entity owned by you.

Revocable Living Trusts & LLCs

Here are some situations where you may have a disregarded entity. In a revocable or living trust that operates under your social security number, you are considered the owner of that property. Another situation is LLCs that are wholly owned by you.  These are situations in which you should talk with your tax adviser to make sure that these entities are disregarded, flow-through entities and essentially just extensions of yourself.

  • 1031 Hotline: If you have questions about disregarded entities and 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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