1031 Exchange into New Purchase

[Simon Gill]

My business partner and I are planning to buy a commercial building in Nevada. He is currently selling his commercial building in Washington and 1031 exchange into the Nevada deal. In order for the 1031 to take place, is he required to carry over his existing LLC or can we create a new LLC for Nevada and he move his funds without moving his existing LLC?

[Bill Exeter]

Hi @Simon Gill, 

I depends.  The important requirement is that the "taxpayer" doing the 1031 Exchange be the same on both sides of the transaction.  

As long as the LLC is a single member LLC and a disregarded entity, it would be treated as if he was the real owner of the underlying real property.  The 1031 Exchange would be set-up under his name (who will relinquish legal title from the single member LLC).  He could acquire the replacement property under his individual name, under the same single member LLC, or under another LLC as long as the new LLC was also considered to be a single member LLC and a disregarded entity.  

The answer would change if any of the LLCs discussed above were not disregarded entities.