1031 Exchange Property from Revocable Trust to an LLC

[Ajay Bodas]

Hello

We recently purchased a property through 1031 Exchange and the title is with our Revocable Trust (Trustee my wife and I). Now we are considering creating a Holding LLC that will be managed and owned by both of us. We would like to then transfer the new property from our Revocable Trust to the LLC.

Is there a minimum holding time before we can do this transfer? I would imagine the LLC will have its own EIN, but we will still report the gain/loss as pass-through income on our joint tax return. I heard someplace that one should hold the 1031 exchange property under the same title (i.e revocable trust) for a year and then transfer it over to an LLC. I have not been able to confirm this.

Thank you

[Daniel Osman]

Hi @Ajay Bodas! There is no specific IRS-mandated minimum holding period for a property acquired through a 1031 exchange before you can retitle it, that's why it's hard to find an answer. 

In your case, transferring the property from a revocable trust to an LLC where you and your wife are the owners should not affect the 1031 exchange, provided the LLC is a disregarded entity for tax purposes . This means the IRS will treat the LLC as if you and your wife still own the property directly, maintaining the continuity of ownership for tax purposes.