Corporate and LLC Structuring

Same Taxpayer Requirement

Under IRC §1031(a)(1), the same taxpayer who sells the relinquished property must acquire the replacement property for a valid tax‑deferred exchange.

Proper entity planning and title continuity are critical to 

preserving eligibility.

Single Member LLCs(Disregarded Entities)

A Single‑Member LLC (SMLLC) is disregarded for federal tax purposes

Treas. Reg. §301.7701‑2(c)(2), meaning the IRS views the individual

as the taxpayer. Therefore, a property held personally may be exchanged into an Single Member LLC — or vice versa — and

still satisfy the same‑taxpayer condition.smooth and stress-free as possible.

Partnership LLC and Multi-Member Entities

When Two or more members own a property through a partnership LLC, the LLC itself is the taxpayer. Each partner can't exchange separately unless the LLC is reorganized in advance. Tyically, the replacement property must be acquired in the same LLC's name and Tax ID.

Drop and Swap

If partners choose to go their own ways, they can convert the partnership interest to a Tenants in Common (TIC) structure before closing. Each partner the owns a direct fractional interest and can individually exchange into separate replacement properties. This maneuver, the Drop and Swap requires careful documentation and title transfer to satisfy IRS scrutiny.

Key Court Precedents Allowing Properly Structured Drop and Swaps

1. Goolsby LLC v. Commissioner (N.Y. Tax Appeals Tribunal – 2023): Endorsed a drop‑and‑swap completed just days before closing. Because members acquired actual ownership and intent to reinvest was clear, the exchange qualified under §1031.

2. Hadar & Shomron LLC v. Commissioner (N.Y. Sup. Ct., June 12 2025): Further confirmed that 

TIC conversion executed  immediately before closing is acceptable when proper 

deeds, resolutions, and exchange agreements prove good‑faith intent to perform a 1031 Exchange.

IRS References & Guidance

IRC §1031(a)(1) – Non‑recognition of gain from exchange of like‑kind investment property.Treas. Reg. §301.7701‑2(c)(2) – Defines single‑member LLCs as disregarded entities for tax purposes.

IRS Publication 544 – Sales and Other Dispositions of Assets; same‑taxpayer and ownership rules. IRS Info Letter 2008‑0025– Acknowledges TIC conversions when executed and recorded properly.

The same‑taxpayer rule is a core eligibility test under §1031, but recent decisions illustrate that courts approve last‑minute restructuring when it reflects true ownership changes and exchange intent