Drop & Swaps – 1031 Exchange

Recently the CA Board of Equalization issued a ruling regarding their position on Drop & Swaps (1031 Exchange) which essentially is a down distribution of interests, owned by an LLC, to its members in order for an LLC member to effect a 1031 Exchange (Drop & Swaps) and avoid payment of certain tax and/or fees.  The decision cites “[a] sale by one person cannot be transferred for tax purposes into a sale by another by using the latter as a conduit through which to pass title.”  While this 1031 Exchange ruling is specific to CA, in time and due to set precedent, we could see this application of ruling on Drop & Swaps across all states in the near future.

For further reading follow the link: https://firstexchange.com/RecentCaliforniaRulingonDropandSwaps

To read the State of California Board of Equalization ruling click the link below:


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