Exit strategy for partnership

[Amy O'Shea]

I have a tax question regarding the exit of 1 of 3 partners from a real estate partnership and would really appreciate any input:

ABC Realty (a general partnership) has 3 equal equity partners (A, B & C). ABC Realty's assets are 5 rental properties (no mortgages) and some cash. Each property is in its own LLC with ABC Realty as the sole member. Partner A wishes to gradually cash out of the buildings and defer the gains with 1031 exchanges. Partners B & C would remain owners of the properties, preferably in the existing LLC's. Is it possible to structure this to qualify for a 1031 exchange - if Partner A is bought out of each LLC (and building) separately (rather than a valuation and exit of the partnership as a whole)? From a tax perspective, can we do a deed from each LLC to A, B & C individually (no change in beneficial owner) and then another deed from A, B and C back to the LLC after transferring ownership of the LLC from ABC Realty to Partners B & C? Then when all properties have been transferred back to the LLC's (now owned by B & C), dissolve the partnership and distribute remaining cash to everyone. I realize the transfers from A, B & C back to the LLC's would have transfer tax consequences for the 1/3 change in beneficial owner. This strategy would entail an appraisal of each building (FMV split 3 ways evenly) rather than a valuation of the partnership as a whole in order to avoid any minority discount hit for Partner A.