The 1031 Exchange Experts
reason for this is that Revocable Living Trusts do not
file income tax returns; any income or expenses, or
gains or losses, are reported in the tax returns of
the beneficiaries of the trust. Because the trusts don't
file a return, the IRS calls them "disregarded entities".
There are, currently, three types of disregarded entities:
Revocable Living Trusts, Illinois Land Trusts and Single
Member Limited Liability Companies. (We are hoping that
Delaware Business Trusts will soon be added to the list,
but that is a topic for a different article).
understand why Living Trusts, or for that matter, the
other two types of entities discussed above, do not
violate the rule that title has to be the same for both
the Old and New Properties, you have to look through
to the actual tax return that owns each property.