Do I Qualify for a 1031 Exchange?

Now that you know the basics of 1031 exchanges, you may be wondering whether or not you qualify for a 1031 exchange. As mentioned in our previous blogs, a 1031 exchange is intended for commercial properties that are used in a trade or business, such as; office spaces, apartments, retail, and land properties. Unfortunately this does not include primary residences or any property held for personal use.

You may currently posses one of these property types, but do you as an commercial real estate investor qualify to take part in a 1031 exchange? According to the IRS, those who qualify for this exchange can include; individuals, C corporations, S corporations, partnerships, limited liability companies, trusts, and other taxpaying entity.

The main factor that qualifies investors in participating in a 1031 exchange is whether or not they are the same taxpayer. What this means is that “the tax return and name appearing on the title of the property that sells must be the tax return and titleholder that buys,” according to Atlas 1031 Exchange. If you as the taxpayer currently holds the title to your soon to be relinquished property than your name must be the name on the title of the replacement property.

There are some exceptions to this rule according to Asset Preservation, “a taxpayer who elects taxation as a sole proprietorship can hold the relinquished property as an individual but the replacement property as a single-member, single-asset LLC.” This option allows the taxpayer the benefit of liability protection is case an incident ensues.

For more readings visit:  IRS,  Atlas 1031 Exchange, and Asset Preservation.


Want to learn more about 1031 Exchanges? Stay tuned, we’ll be blogging more about 1031 Exchanges in the days to come.

Read all the articles in our 1031 Exchange Series here: