Partnership LLC Sells Rental, Invests in DST, Closes LLC, Can DST be Distributed?

[Tom McDaniel]

2 Person Partnership LLC (Form 1065, K-1s to Partners) owns Rental Property which is planned to be sold. Proceeds to be used for 1031/DST, LLC would then be owner of record for 1031/DST.

Plan to close LLC in 2024 or 2025.

Can the LLC transfer the 1031/DST to the partners in their names as part of the LLC close-out Distribution without triggering any bad things such as income tax or invalid ownership of 1031/DST?

[Dave Foster]

@Tom McDaniel After dissolving the LLC, each individual partner would be considered tenants in common and the interest would then be distributed evenly to each partner. This would allow each of them to take that 50% interest and invest it as they please. If they did a 1031 exchange they will retaining a tax deferred status. Distributions from an LLC are not a taxable event. The real question for you is, will the DST separate the ownership without making you sell it? This would be a question for the DTS sponsor.