The short answer
Yes, provided the LLC has one owner and that owner is you. A domestic eligible entity with a single owner is "disregarded as an entity separate from its owner" under Reg. §301.7701-3(b)(1)(ii), so the deed can read differently from the one you signed at the sale while the taxpayer stays the same. An LLC with a second member is a partnership, a different taxpayer, and its membership interest is not real property under Reg. §1.1031(a)-3(a)(5)(iii); partners who want in have to be co-tenants on the deed instead, or wait until well after the exchange.
At a glance
| Vesting that works | You, or an LLC whose only member is you (directly or through another) |
|---|---|
| Vesting that fails | An LLC with any second member, a partnership, or a corporation you own |
| Formation deadline | The entity must exist and be able to hold title before documents are drafted |
| Assignment rule | Reg. §1.1031(k)-1(g)(4)(v): assign to the QI, notify all parties in writing |
| Adding a member later | Rev. Rul. 99-5: a deemed sale of undivided asset interests plus a §721 contribution |
| Co-ownership alternative | Rev. Proc. 2002-22 ruling conditions cap co-owners at 35 and bar any partnership return |
| Reporting | Form 8824 is filed with your return; a disregarded LLC files no return of its own |
One member means one taxpayer, so the deeds are allowed to disagree
The same-taxpayer requirement looks through the entity, not at the deed. Because a one-owner LLC has no separate federal tax existence, property it holds is treated as held by you, and the replacement closing is your closing even though the grantee is a company formed the week before.
That is why the sequence in practice is: sell in your own name, form the LLC while the exchange is running, and have the intermediary direct-deed the replacement to the LLC. Nothing about the exchange documents changes except the name of the grantee.
The opposite direction is equally fine. Sell out of an existing single-member LLC and take the replacement personally, or move from one of your LLCs to another. Which LLCs can do a 1031 exchange works through the classification rules that make this possible.
The single-member LLC is what satisfies a lender's special-purpose borrower requirement
Commercial lenders on larger loans frequently require the borrower to be a newly formed entity that owns nothing but the subject property. A single-member LLC meets that description and stays disregarded, so the loan requirement and the exchange requirement do not collide.
Tell the intermediary the borrowing entity the moment the term sheet arrives. The exchange agreement, the assignment of the purchase contract and the closing instructions all name the grantee, and changing that name the day before funding is how closings slip.
Ask your lender in writing which of its conditions touch ownership rather than liability. A guaranty you sign personally does not add an owner; a requirement that a second party hold even a token membership interest does. Getting a mortgage using exchange funds as the down payment covers the funding mechanics.
Partners who want in have two lawful doorways, and a membership interest is neither
If someone else is putting money into the purchase, the clean structure is co-ownership: you take an undivided percentage of the fee, they take the rest, and each of you is on the deed. Your exchange covers only your undivided share, so that share has to carry the value and debt you relinquished.
Keep the co-ownership from drifting into a partnership. Rev. Proc. 2002-22, the ruling framework the industry follows, requires that each co-owner hold title as a tenant in common under local law and that the co-ownership not "file a partnership or corporate tax return, conduct business under a common name" or otherwise hold itself out as an entity.
The alternative is to keep the exchange simple and let the other party invest separately afterwards. Buying a replacement property with a partner compares both routes.
- No more than 35 co-owners, with a married couple counted as one person under Rev. Proc. 2002-22 §6.02
- Unanimous approval for any sale, lease or re-lease, hiring a manager or creating a blanket lien (§6.05)
- Each co-owner free to transfer, partition and encumber, subject only to customary lender restrictions (§6.06)
- Revenues and costs shared strictly in proportion to each undivided interest (§6.08)
- Debt secured by a blanket lien shared in the same proportions (§6.09)
Admitting a member after closing is a taxable event on the day it happens
Rev. Rul. 99-5 treats a new member's purchase of part of your interest as a purchase of an undivided share of every asset the LLC holds, followed at once by both of you contributing those shares to a partnership under §721. You recognise gain or loss on that deemed sale.
Where the new member instead contributes cash to the LLC, no deemed sale occurs and §721 covers the contribution, but the entity still converts to a partnership from that moment and starts filing Form 1065.
Neither route is a way to admit partners a month after the exchange. The property has to have been acquired to hold for productive use or investment, and a prearranged admission invites the question whether it ever was. Gifting or moving the replacement property after the exchange and how long to hold before selling again set out the exposure.
Worked hypothetical: a $1,200,000 replacement taken by a new one-member LLC
Round hypothetical numbers. You sold a duplex held in your own name for $800,000, cleared a $250,000 loan and $45,000 of costs, and $505,000 sits with the intermediary. The replacement is a $1,200,000 retail building and the lender wants a new entity on the note.
You form an LLC in the property's state, you are its only member, and it uses your Social Security number rather than an EIN. The intermediary wires $505,000, the lender funds $695,000 to the LLC, and the deed runs from the seller to the LLC. Form 8824 is filed with your personal return.
Change one fact. Let your business partner take a 10% membership interest at that closing and the buyer becomes a partnership, which never relinquished anything. The exchange has no qualifying replacement property, and the entire $800,000 sale becomes taxable.
What the title company and intermediary need, and when
Give the exact vesting language before anyone drafts, because retyping a grantee after documents are out is what turns a routine closing into a missed deadline.
Have your CPA or attorney confirm the entity's classification and the state filing before you commit to the closing date, since a defective entity cannot be repaired after the deed records.
- The full legal name of the LLC exactly as the secretary of state shows it, plus the state and date of formation
- Evidence the entity is qualified to hold title where the property sits, which a foreign-state LLC usually is not on day one
- Whether the exchange reports under your Social Security number or an EIN, and which one the closing agent will use on Form 1099-S
- The operating agreement showing one member, with no second member admitted and none scheduled
- Assignment of the purchase contract to the intermediary, plus notice to the seller before the deed passes
- Any lender requirement touching ownership rather than guaranty, flagged to counsel before the term sheet is signed
Related questions
My lender's loan documents require a second, non-economic member. Is the LLC still disregarded?
That is a question for tax counsel and the lender together, because the classification turns on whether the second party is an owner for federal tax purposes. Raise it before you sign the term sheet rather than in the closing week.
Does the new LLC need its own EIN?
Not for federal income tax, since a disregarded entity may use its owner's number, though banks and some states ask for one. Whichever you use, the exchange must be reported consistently on the settlement statements and on Form 8824.
Can I form the LLC after the replacement property closes and deed it over later?
Yes, and a transfer to a wholly owned disregarded LLC does not change the taxpayer. Leaving a gap between closing and transfer is generally cleaner than forcing a rushed formation, but confirm the timing and the transfer tax with your attorney.
My state requires my spouse to sign the deed even though she is not an owner. Does that add her?
Signing to release a homestead or marital interest is not the same as taking title, but the deed wording decides it. Adding or removing a spouse on title covers what happens when the vesting really does change.
Can the LLC buy a DST interest instead of a building?
Yes, and the subscription is signed by the LLC with you as the member of record. Exchanging into a DST when your property is held in an LLC or trust covers the accreditation and signature requirements.
Sources
Checked against these publications on September 19, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.
- 26 CFR § 301.7701-3(b)(1)(ii) (a single-owner domestic eligible entity is disregarded)
- 26 CFR § 1.1031(a)-3(a)(5) (partnership interests and other intangibles are never real property)
- 26 CFR § 1.1031(k)-1(g)(4) (qualified intermediary; assignment of contract rights and written notice)
- Rev. Rul. 99-5 (admitting a member: deemed asset sale, §721 contribution, basis and holding period)
- Rev. Proc. 2002-22 (conditions for ruling that an undivided fractional interest is not a business entity)
- Instructions for Form 8824 (reporting the exchange; disregarded entities and related parties)