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Changing Property Ownership After a 1031 Exchange

An important rule to keep in mind when considering a 1031 exchange is that in order to gain tax deferral benefits, title to the replacement property must be held using the same tax ID of the property that was sold. This “same taxpayer’ requirement is not a serious concern when a single owner is completing an exchange, but can be come problematic if the investment property is owned by multiple owners under certain ownership structure such as LLCs, LLPs, C-corporations, S-corporations, etc. Problems can arise in these types of group ownership structures when partners or members wish to go their separate ways after a 1031 exchange is completed.

Can You Change Ownership in a 1031 Replacement Property?

It may be possible to change the ownership of the 1031 replacement property provided several important conditions are met. 


Changing ownership soon after an exchange is completed is very likely to raise the risk of the exchange being disallowed due to violating the “same taxpayer” concept. However, many tax advisors will support changes to the ownership when the exchange has become “old and cold.” While there is no written minimum holding period in the tax code, a prudent recommendation by many tax professionals would be hold the property in same ownership form for at least several years. After passage of an appropriate amount of time and, subject to validation from a qualified tax professional, participants in group ownership structures such as LLCs can be bought out by other participants and exit property ownership. 

Ownership Structure

Participants in ownership structures such as LLCs may elect to convert the form of their ownership into a Tenant-in-Common (TIC) structure. The IRS allows participants in a TIC (and also a DST) ownership structure to be treated as individual owners who can independently pursue reinvestment strategies without being tied to what other fellow co-investors decide to do. Tax advisors generally advise clients who plan to convert an LLC structure into a TIC structure to do so after a significant time has passed since their exchange was completed – or convert the ownership of the relinquished property to a TIC well before the exchange is completed. When TIC or DST owned property is sold, participants may immediately go their separate ways and still be permitted to complete a follow-on 1031 exchange.


Investment replacement properties may also be placed in revocable living trusts after a 1031 exchange without triggering a potential tax liability. 

TICs, DSTs, and revocable trusts are each considered a disregarded entity” by the IRS. While they are separate legal entities that may limit an owners liability, for tax purposes theyre treated as part of the owners personal activity. Any investments held in the name of these entities use the same tax ID number as the individual owner. Therefore, these changes in title will not cause a 1031 exchange to fail. 

Changing Ownership Between Spouses 

If a married couple jointly owns the relinquished property, the replacement property should be held in the same way. If only one spouse is on the title to the relinquished property, a situation may arise when either the property owner or the lender wants to add the other spouse to the title. 

Since the relinquished property was sold by a single owner and the replacement property technically has two owners with separate tax IDs, this could cause the exchange to fail, at least in part. In most cases, CPAs and other tax advisors recommend keeping the title exactly the same and waiting several years before making any changes. 

If a lender mandates that a spouse be added to the title, investors should request documentation showing the title change was due to financing requirement and not done by them to avoid tax liability. 

Communicate Changes 

If youre making any changes to the title of your replacement property, it is highly recommended that you communicate planned changes to knowledgeable third parties such as your tax advisor, estate planner, financial professional, or attorney and have them confirm that your intent in making the change was other than to avoid potential tax liabilities. 

If you plan to complete a 1031 exchange after an ownership change it is also critical to inform your Qualified Intermediary (QI) of the details. This will help prevent you from inadvertently making a change that is not allowed and ensure all exchange documentation and instructions reflect the new entity and share interest. 

Working with a team consisting of a qualified tax advisor, attorney, and financial professional who are all well-versed in the nuances of a 1031 exchange will help you stay within the required parameters of the tax rules. 

To learn more about your options, contact us at for a consultation. 

Please note that we are not able to provide specific personal tax advice and you should consult with your team of professional tax and legal advisors prior to making any changes to ownership. If you need referrals to tax and legal professionals, please contact us. 

Help Save 1031 Exchanges
Write to your Member of Congress and Senators urging them to oppose restricting Section 1031 like-kind exchanges. As part of the American Families Plan, the Biden Administration has proposed eliminating the application of Section 1031 for gains greater than $500,000. Like-kind exchanges have been part of the U.S. tax code since 1921 and are one of the tax code’s most powerful economic tools. It is critical that we all vigorously and visibly oppose this proposal. Make your voice heard with a pre-filled letter, which you can customize to add personal anecdotes or powerful client stories to highlight the positive impact of Section 1031 like-kind exchanges. Take action today by clicking HERE.

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Paul Getty

Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $3 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student, and senior housing. Paul’s transaction experience includes buy and sell side representation, sourcing and structuring of debt and equity, workouts, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions. Paul also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals. Prior to founding First Guardian Group/FGG1031, Paul was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 35 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion-dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M. Paul holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered financial representative with LightPath Capital Inc, member FINRA /SIPC. Paul is a noted speaker, author, and actively lectures on investments, sales, and management related topics. He is author of The 12 Magic Slides, Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors, and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

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