Can I 1031 Exchange into a Business (Such as an LLC or a Partnership)?

A common question we get asked is: “can I 1031 exchange into a business, such as an LLC or partnership?”

1031 Exchanges and Business Property

The good will of a business is generally excluded from 1031 treatment.

Partnership interests are generally excluded from 1031 treatment.

According to concepts in Rev. Rul. 99-6 and as applied to 1031 exchanges, one can be deemed to have received real property by means of receiving an assignment consolidating 100% of the membership interest in a single-member LLC (an entity that holds title to real property for 1031 purposes), so that the entity is disregarded for federal income tax purposes...and 100% owned by the taxpayer completing the exchange. The portion of the underlying real property corresponding to the part ownership entity that was not owned previously can constitute real property for 1031 purposes.

Purchase of a partnership interest that results in actual termination of the entity is treated as an “asset” purchase (of the underlying real property assets) with respect to the portion purchased.

McCauslen v. Commissioner,45 T.C. 588 (1966)

The sole owner of an LLC, which is disregarded for tax purposes, is in the same position economically as if he/she had taken title in his/her own individual name. Ltr Rul9751012.https://www.irs.gov/pub/irs-wd/1048025.pdf

Another Authority is: Reg Section 301.7701-2 and 3.

Exchange Your Investment Property & Defer Your Capital Gains Taxes

Under section 1031 of the Internal Revenue Code, you can exchange your investment property for like-kind replacement property and defer your capital gains taxes in the process. At CPEC1031, LLC we are here to help you with all things related to your 1031 exchange. We have more than two decades of experience in the 1031 exchange industry and can put our experience to work on your next like-kind exchange. Bring your questions to a skilled intermediary at CPEC1031 today. You can find us at our downtown Minneapolis office.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Can I Get Out of a 1031 Exchange After Starting the Process?

The simple answer is yes – you can get out of a 1031 exchange after you’ve begun the process. But how exactly do you do that and what are the implications? In this article, we are going to talk about how you can get out of a 1031 exchange after starting the process

The easiest way to back out of your 1031 exchange after it has begun is to simply run out the clock on your 180 day exchange period. After you sell your relinquished property, you have 180 days to complete your exchange. If you fail to identify and exchange into replacement property within that period, your exchange will automatically fail.

Important Considerations

If you intentionally allow your exchange to fail, there are some important considerations to bear in mind. Most importantly, if you’ve already sold your relinquished property and (before your exchange period is up) decide to back out of the exchange, you will then owe capital gains taxes on the sale of your relinquished property. This can result in a potentially hefty tax bill so it’s important to keep that in mind. If you want to defer your capital gains taxes, you should work to salvage the 1031 exchange and complete everything within your 180 day time period.

Contact a Qualified Intermediary at CPEC1031, LLC

Contact one of the qualified intermediaries at CPEC1031, LLC today to get the help you need with your next like-kind exchange of investment real estate. With over twenty years of experience, our team is here to help you through the ins and outs of the 1031 exchange process with the ultimate goal of deferring your capital gains taxes on the sale of your property. Reach out to our team today to get started with your next 1031 exchange and see how we can make the 1031 exchange process as seamless as possible for you. Our primary office is located in downtown Minneapolis, but we work with taxpayers across the United States.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

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Video – Can You Buy a Business with Your 1031 Exchange Funds?

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It’s important to remember that 1031 exchanges are limited to solely real estate. It’s also important to remember that partnership interests are excluded from 1031 treatment as is the good will or going concern of a business.

However, there is a situation in which you can buy an interest in a business and have it qualify for 1031 exchange treatment. That’s when you buy out and consolidate to receive 100% of an entity. Let’s say you’re in a partnership with another individual and you buy out all of that individual’s interest in the partnership, consolidating 100% of the entity in your own capacity – making it a sole-proprietorship. In doing so, you’re deemed to have purchased out the underlying real estate that’s allocable to that other person’s interest in the entity. This comes from revenue rule 99-6. It’s a great way to buy out and consolidate and LLC in one person’s name. It’s also a great way to use up your 1031 exchange funds to buy up a property that you’re already familiar with.

Get Started with the 1031 Exchange Process

Begin your 1031 exchange today by contacting a qualified intermediary at CPEC1031, LLC. With over twenty years of experience, we are well-suited to handle all of the details surrounding your 1031 exchange of investment real estate. We’ve helped many taxpayers throughout the United States with their like-kind exchanges and we can help you with yours. Contact us today to learn more about our numerous service offerings and see how we can help you with your next 1031 exchange. Our team can help you with any type of exchange in any locale throughout the country.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

 

1031 Exchange Tips for Beginners

Section 1031 of the Internal Revenue Code can be used by any US taxpayer – from beginners to seasoned professionals. 1031 exchanges may sound easy on paper, but they can get complicated quickly. In this article, we are going to offer up a few 1031 exchange tips for beginners.

Make Sure Your Property Qualifies for 1031 Exchange

Before you do anything else, you need to make sure your property even qualifies for 1031 exchange treatment. First, your property needs to be real estate. Items of personal property are not allowed to be used in a 1031 exchange. Second, you need to make sure you are holding your property for investment or business purposes. Real property held for personal purposes, such as your primary residence, cannot be used in a 1031 exchange.

Don’t Miss Your 1031 Exchange Deadlines

You also need to know that 1031 exchanges are governed by strict time deadlines. Once you begin your exchange, you have just 180 days to complete the process. The first 45 of those days are known as your “identification period.” During that 45-day period you must give written identification of your replacement properties. These are hard deadlines that can only be amended in the rarest of occasions.

Start Your Like-Kind Exchange of Investment Real Estate

Contact CPEC1031, LLC today to start your like-kind exchange of investment real estate. Our skilled intermediaries have more than twenty years of experience facilitating exchanges under section 1031 of the Internal Revenue Code. We can help you through all the stages of your 1031 transaction, answering all of your questions and making sure you understand all the requirements along the way. Reach out to us today at our downtown Minneapolis office to learn more about our services and get started on your next exchange!

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

 

Video – RSVP for a 1031 Exchange Workshop in Rochester, MN

Jeff Peterson here with an important update. We’re putting on a workshop on 1031 exchanges live and in person in Rochester, MN on April 24 at the Rochester Area Foundation. Space is limited and this course is approved for two hours of Continuing Education Credit for real estate agents. It’s going to be a really neat event and we hope to see you there!

  • When: Thursday, April 24, 2025, 9:30AM - 11:30AM (9:00 AM - Check in & Networking)

  • Where: 12 Elton Hills Dr NW, Rochester, MN 55901-3538

Secure your spot by RSVPing at the link below:

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Defer the tax. MAXIMIZE your gain.