Same Taxpayer Requirement
Any Taxpayer or tax entity can complete an exchange. However, title to the replacement property should be taken the same way title of the relinquished property was held. The only exception to this rule would be the use of a disregarded entity, such as a single-member limited liability company (LLC). Except in a community property state, a husband and wife wishing to use a single-member LLC to acquire the replacement property would have to create a separate single-member LLC for each spouse and each LLC would acquire a 50% tenant-in-common interest in the replacement property. If using a single-member LLC, the taxpayer would have to elect to be treated as a disregarded entity for tax purposes. Some other disregarded entities, such as an Illinois Land Trust (Rev. Ruling 92-105) and a revocable living trust (Rev. Rul. 92-105, Rev. Rul. 70-376 and Rev. Rul. 88-103) will also qualify. A Delaware statutory trust is also treated as a disregarded entity.