Can I 1031 exchange to myself??

Question

I currently own two duplexes in addition to my primary residence. Recently, a neighbor at one of my duplexes approached me to see if I was interested in selling. I’ve owned the property for 15+ years and have a good amount of equity. I would rather not pay the taxes on the sale if i can avoid it.

My question is, can I sell my other property to myself to shelter the proceeds. I believe the second property is in both my wife and my name. I can transfer either property to an LLC if necessary.  But I’m just curious if anyone else has done this before.

Thanks in advance!!

Whitney Nash · Answer

Hello @Nicholas Rella

Unfortunately, no, you can not use 1031 exchange funds on property that you already own/towards debt. The replacement property must be ‘real property' that is ‘new to you'. This includes your LLC since it is tied to you.

Mohammed Rahman · Answer

Hey @Nicholas Rella - most likely not, otherwise people would be 1031'ng all of their capital gains indefinitely without reinvesting back into other properties (which is what the government wants real estate investors to do and the whole purpose behind the 1031 program).

Carlos Ptriawan · Answer

Wow, this is an excellent strategy, thanks again, Dave.

Dave Foster · Answer

@Nicholas Rella, The only way a 1031 exchange would work would be if the LLC was a multi-member LLC that you do not own more than 50% of (your wife cannot own the other 50% if you file a joint tax return).  Otherwise, the LLC is either reported on your personal tax return (making you and the LLC the same taxpayer) or as a more than 50% member you are a related party.

You can't exchange into a property you already own and must purchase actual real estate to complete a 1031 exchange.

Can I 1031 exchange to myself??

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