Trust-held assets and 1031 related-party limitations
Hi everyone:
I am curious if any 1031 experts could weigh in on the following:
I believe that 1031 exchanges disallow "related party transactions" where family members are related parties if they are siblings, spouses, ancestors, and lineal descendants. Excluded from this list are in-laws. So, hypothetically, I own a property and I could do an exchange with my mother-in-law or my daughter-in-law.
My wife and I have a living trust (for estate planning purposes) that owns a California LLC that owns a property. If I exchanged this property with my father in law, it seems like I could be violating the related parties rule (because my wife is an equal owner of the trust that is the beneficial owner of the LLC). If we recorded a quitclaim deed signed by my wife (signalling her lack of ownership in the property) could I then demonstrate sole ownership of the parcel (and thus not violate the related-parties prohibition for an exchange?)
Thanks in advance for any informed advice.