Exchanging Thoughts

Understanding the Same Taxpayer Rule

Posted by Ellie Trovato on Fri, Jun 01, 2018


This Friday Free for All we will discuss an important rule in a 1031 tax deferred exchange: the same taxpayer requirement.

Any taxpayer, from an individual to an entity such as a partnership, LLC, trust  or corporation, can complete a 1031 exchange. To meet the same taxpayer requirement, however, title to the replacement property must be taken the same way it was held on the relinquished property.  Since an exchange is considered a continuation of the original investment in the relinquished property, title must reflect that continuation on the replacement property.

As with many rules, however, there is one exception: the use of a disregarded entity for tax purposes. In a disregarded entity, such as a single-member limited liability company (LLC), the business entity is not separate from its single-member owner and the underlying taxpayer remains the same. In this case, the entity does not file a separate tax return. Instead, any income, expenses  and loss is reported on the single-member owner’s tax return.

Other examples of disregarded entities include the following:

    • An Illinois Land Trust
    • A Revocable Living Trust and
    • A Delaware Statutory Trust.

Whether you have questions about the same taxpayer requirement or other requirements of 1031 exchanges, our Exchange Team is always available to answer questions.


Topics: 1031 exchange rules, tax consequences of a 1031 exchange, 1031 exchange assignment; 1031 exchange rules, 1031 exchange same taxpayer; 1031 same owner rule, Same Taxpayer Requirement