Can my LLC 1031 into a property owned by my other LLC?

Question

I have a property owned by a member-managed LLC in Hawaii. Can it be 1031 exchanged into a like-kind property in Washington state owned by an LLC where I am also a member-manager? (Why you ask? Washington State has no personal income taxes and the gain on the Washington property, would be less than the Hawaii property).

Dave Foster · Answer

@Christopher Louden, this strategy would be fine as long as the (taxpayer) is the same. The taxpayer is defined as the tax return that reports the activity of the property. If the HI property does not file its own tax return, then the activity of the property is reported on your personal return. If the WA LLC is set up the same way (it is what is called a disregarded entity). Then the new property will also be reported on your personal tax return. So the taxpayer isn't changing. As long as the taxpayer remains the same for the investment property being sold and the one being purchased, you can satisfy your 1031 exchange.

Even if you decide to sell as your single-member LLC and purchase your replacement property in your personal name, that would still be fine because you are ultimately the same taxpayer for both. If it were a multi-member LLC, then the LLC would be the taxpayer and have to take title to the replacement property.

The IRS's main concern is who would be reporting the 1031 exchange. Your accountant will file the 8824 form, which reports your exchange on the appropriate tax return.

Your strategy is very sound. You just need to make sure the taxpayer stays the same, and you'll get out of the state taxes from HI. When you later sell.

Ashish Acharya · Answer

If you’re thinking about using a 1031 exchange between two LLCs you own, the IRS rule to keep in mind is the “same taxpayer” requirement. In simple terms, the entity that sells the first property has to be the same entity that buys the replacement property.

Here’s where LLC ownership matters:

If both of your LLCs are single-member LLCs (and you’re the sole owner), the IRS usually ignores the LLCs and treats you as the taxpayer. In that case, yes, you can generally exchange from the Hawaii property into the Washington property without breaking the rules.

If either LLC has more than one member, the IRS sees that as a separate taxpayer. That means the exchange wouldn’t qualify, since it’s not the same “taxpayer” selling and buying.

It’s also worth noting that moving from Hawaii to Washington won’t erase the federal tax exposure, a 1031 only defers gain, it doesn’t eliminate it. The advantage is more on the state side: Hawaii taxes income, while Washington doesn’t. But Washington does have real estate excise tax and other costs you’ll want to factor in.

Bottom line: If both LLCs are disregarded entities with you as the only owner, the exchange can work. If there are other members involved, it won’t. And either way, you’ll want to run this through a qualified intermediary and a CPA before moving forward, since 1031s are one of the IRS’s favorite areas to scrutinize.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Duc Ong · Answer

@Christopher Louden

Good question, and you’ve already gotten some solid technical answers here.

One angle I’ll add from experience: a lot of investors don’t realize that the “same taxpayer” rule isn’t just a federal IRS issue — it can play out differently when you factor in state-level taxation. Hawaiʻi is especially aggressive on tracking gains, even if you move capital out of state. You’ll want to make sure you’ve mapped out how Hawaiʻi will view the transaction at the time of sale, since they may still claim the tax even if your replacement property sits in Washington.

Another consideration: the financing side. Some lenders will only allow the same entity to be on title if you’re exchanging, so if you’re thinking about moving into a new LLC, make sure the lender lines up with the tax structure you’re aiming for.

Finally, if you are looking at Washington for the no state income tax angle, it might be worth modeling out a long-term strategy that includes future exchanges or even syndications. That way, you’re not just optimizing this single transaction, but building a framework you can keep using as your portfolio grows.

I’d definitely loop in a CPA and QI early, because once you start the 1031 clock, you don’t want to be scrambling to restructure entities under deadline.

Casey Owens · Answer

@Christopher Louden Yes, this comes down to what’s called the “same taxpayer rule.” To complete a valid 1031 exchange, the taxpayer who sells the relinquished property must be the same taxpayer who purchases the replacement property.

If your Hawaii LLC is the title holder and doing the exchange, then the Washington LLC would need to be treated as the same taxpayer for IRS purposes. That can sometimes be the case—for example, if both LLCs are single-member and disregarded entities owned by the same individual or entity. But that’s not always straightforward, especially if there are multiple members or if the ownership structures differ.

This is definitely something you’d want to run by a CPA or tax advisor who can look at the specific setup of your LLCs and make sure it qualifies.

Steve Wolterman · Answer

@Christopher Louden , If you are the only member of the LLC then you are looked at as the tax payer so you could purchase in a different LLC you are the only member of. If there are multiple members, the LLC is the taxpayer not you. You would need to sell and purchase in the same LLC. Another option if there are multiple members and you want to go your separate ways is restructuring the LLC before the sale doing what we call a drop and swap.

Chris Seveney · Answer

Based on quick google search the answer is no but you may want to speak to someone who specializes in this and get to know the QI for when the time is right to do a 1031

Can my LLC 1031 into a property owned by my other LLC?

Can my LLC 1031 into a property owned by my other LLC?

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