Real Estate Law
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Please help me understand a little better. Do both LLCs own separate properties? Are you selling both? Is the 6 member LLC the owner of one property & the 4 member the owner of the other?
Each company would be able to do a 1031 on its own for the properties it is selling.
Are you asking if you need to add tenants to the property and have it rented to take advantage of the 1031 exchange?
No, an LLC member interest, where the LLC elects to be treated as a partnership, or a partnership interest are considered personal property and cannot be exchanged. IRC Section 1031(a)(2)(D) specifically prohibits the exchange of partnership interests. However, both an LLC or partnership (or any other entity for that matter) can do a 1031 exchange on the entity level, meaning the entire partnership relinquishes a property and the entire partnerships stays intact and purchases a replacement property.
No. The individual member cannot take advantage of the 1031 exchange that the LLC would have. Only the LLC can do so.