1031 Exchange Property from Revocable Trust to an LLC

Member since 2025 · 2 posts · 0 votes

Hello

We recently purchased a property through 1031 Exchange and the title is with our Revocable Trust (Trustee my wife and I). Now we are considering creating a Holding LLC that will be managed and owned by both of us. We would like to then transfer the new property from our Revocable Trust to the LLC.

Is there a minimum holding time before we can do this transfer? I would imagine the LLC will have its own EIN, but we will still report the gain/loss as pass-through income on our joint tax return. I heard someplace that one should hold the 1031 exchange property under the same title (i.e revocable trust) for a year and then transfer it over to an LLC. I have not been able to confirm this.

Thank you

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Daniel Osman

Accountant · 1031 Exchange Qualified Intermediary | Nationwide · Member since 2024 · 53 posts · 32 votes

Hi @Ajay Bodas! There is no specific IRS-mandated minimum holding period for a property acquired through a 1031 exchange before you can retitle it, that's why it's hard to find an answer.

In your case, transferring the property from a revocable trust to an LLC where you and your wife are the owners should not affect the 1031 exchange, provided the LLC is a disregarded entity for tax purposes . This means the IRS will treat the LLC as if you and your wife still own the property directly, maintaining the continuity of ownership for tax purposes.

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Jared Smith
Real Estate Agent · Lakeland, TN · Member since 2015 · 214 posts · 105 votes
1y
@Ajay Bodas I have heard the same recommendation from my 1031 Intermediary and tax guy, but they both also said, "It Depends"... following this post to see what some other smart members know!
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Daniel Osman
Accountant · 1031 Exchange Qualified Intermediary | Nationwide · Member since 2024 · 53 posts · 32 votes
1y
Hi @Ajay Bodas! There is no specific IRS-mandated minimum holding period for a property acquired through a 1031 exchange before you can retitle it, that's why it's hard to find an answer.

In your case, transferring the property from a revocable trust to an LLC where you and your wife are the owners should not affect the 1031 exchange, provided the LLC is a disregarded entity for tax purposes . This means the IRS will treat the LLC as if you and your wife still own the property directly, maintaining the continuity of ownership for tax purposes.

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Teresa BoykinPro Member
Member since 2025 · 14 posts · 8 votes
1y
@Ajay Bodas There is no formal timeline in section 1031 that says how long you have to hold the property before changing the titleholder. However, a general rule of thumb is to hold it in the same taxpayer name for at least one year before making any changes. The longer it stays in the same taxpayer name before changing it, the better.

I would also suggest you speak to your CPA before making any decisions.
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Ajay Bodas
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Member since 2025 · 2 posts · 0 votes
1y
Thank you @Teresa Boykin @Daniel Osman @Jared Smith.
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
1y
@Ajay Bodas Transferring a 1031 exchange property from a revocable trust to an LLC can be done, but timing is crucial to avoid IRS scrutiny. While there is no official holding period, tax advisors recommend keeping the property under the trust for at least 12 months to meet the "held for investment" requirement. If your new LLC is a disregarded entity (single-member or owned solely by you and your spouse in a community property state), it won’t trigger a taxable event, and you’ll continue reporting income on your personal return.

However, electing partnership or corporate taxation could be seen as a sale, causing unintended tax consequences. Be aware of state transfer taxes and property tax reassessments, as some states (like California) may impose higher taxes upon transfer. Depreciation schedules remain unchanged unless the LLC is taxed as a partnership or corporation. To avoid issues, hold the property in the trust for a year, ensure the LLC is properly structured, and consult a CPA or 1031 exchange expert to confirm compliance with state and federal tax laws.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
1y
@Ajay Bodas, Be careful!. There's actually some deeper nuance here than just the holding period. @Jared Smith it depends is pretty spot on!!!
Like @Ashish Acharya, said there is no holding period and if you're transferring into a disregarded LLC holding period isn't relevant. Because you are not changing the tax return that reports the activity of the property.

But... the IRS holds the position that Husband/wife LLCs can only be disregarded in community property states. In non-community property states a husband/wife LLC is supposed to be treated as a partnership And transferring from a revocable trust (reported on your 1031) to a partnership LLC (that files it's own tax return) is changing the tax payer. And this might indeed require some time to pass before doing that.
You could still create a single member LLC with either you or your wife as member. And this LLC could be disregarded. It will still be reported on your personal tax return.
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