The short answer
Yes. While you can revoke the trust, you are treated as the owner of its assets under section 676, and an LLC whose only member is that trust is disregarded under the entity classification rules. Each link is looked through, so for income tax purposes you sold and you bought. The structure works as long as every link stays disregarded through the replacement closing: the trust stays revocable, the LLC has one member and no election, and the deed names the LLC the intermediary expects. The work is in documenting that chain for the intermediary, the title company and the lender.
At a glance
| Revocable trust | Grantor treated as owner of its assets, section 676 |
|---|---|
| LLC owned by the trust | Single owner, so disregarded by default |
| Taxpayer | The grantor, on the sale and the purchase |
| Joint trusts | Two grantor spouses can mean two owners; check before relying on it |
| What breaks it | Grantor's death, a second LLC member, or an entity election |
| Paperwork | Trust certificate, LLC formation and operating agreement, signer authority |
Each link in the chain is looked through to you
Section 676(a) treats the grantor as the owner of any portion of a trust where the grantor or a non-adverse party can revest title in the grantor. A revocable living trust fits that description, and Rev. Rul. 2004-86 restates the long-standing rule that a person treated as the owner of a trust under these provisions is considered to own the trust's assets for federal income tax purposes.
The second link is the LLC. Under Reg. section 301.7701-3(b)(1)(ii) a domestic eligible entity with a single owner is disregarded unless it elects otherwise, and Reg. section 301.7701-2(a) treats its activities as those of a branch or division of the owner. The owner is the trust, and the trust is looked through to you.
Put together, the trust's sale is your sale and the LLC's purchase is your purchase. Selling in your name and buying in your revocable trust rests on the same first link.
The chain has to hold at the moment the replacement closes
Every link must still be disregarded when the LLC takes title. The common ways a chain breaks are events, not drafting.
- The grantor dies during the exchange: the trust usually becomes irrevocable and a separate taxpayer, and the exchange questions move to the trust; see the executor's guide.
- A second member is admitted to the LLC, such as a child or a second trust: the LLC becomes a partnership by default.
- The LLC elects corporate or S corporation status: it becomes a separate taxpayer.
- The trust is amended to make it irrevocable for asset protection: whether it stays a grantor trust depends on the new terms.
Joint trusts of married couples need one more check
Many couples hold property in one joint revocable trust. Reg. section 1.671-2(e)(1), as quoted in Rev. Rul. 2004-86, treats as a grantor any person who creates a trust or makes a gratuitous transfer of property to it, so each spouse can be a grantor of the portion they contributed and the trust can be treated as owned by two people. An LLC whose sole member is that trust may then have two owners for tax purposes, and a two-owner LLC is a partnership by default.
In community property states, Rev. Proc. 2002-69 lets spouses treat an entity they own as community property as disregarded. Outside them, the same choices apply as in buying through an LLC both spouses own. Have your CPA look at the trust before the LLC is formed.
A worked example of documenting the chain
Hypothetical: the Cove Trust, revocable, with one grantor, sells a rental for $1,000,000. The grantor forms Harbor Lane LLC with the trust as sole member and no election, and the LLC buys a $1,150,000 replacement.
The intermediary's file should show the trust as exchanger, the LLC as the trust's disregarded entity designated to take title, and the grantor as the taxpayer. Run your own numbers with your CPA.
- Certificate or abstract of trust showing the trust is revocable and naming the trustee who signs.
- LLC formation filing and an operating agreement naming the trust as sole member.
- A written statement that the LLC has made no classification election.
- Exchange agreement, assignment of the purchase contract and deed all consistent with that chain.
- Lender loan documents in the LLC's name, with any guaranty from the trust or grantor reviewed for consistency.
Form the LLC before the replacement contract is assigned
Forming the LLC after the purchase contract is signed is common but adds a step: the contract has to be assigned to the LLC, and the intermediary's assignment has to name the right party. Doing it early avoids a last-minute change at the closing table, which is the moment a title company may want to change vesting.
If the goal is liability protection without a direct property, a DST interest can be held in a trust or LLC on the same look-through basis.
Related questions
Does the LLC need its own EIN?
Many single-member LLCs get one for banking and lending. Getting a number does not change the LLC's classification; the classification rules decide that.
Can the trust sell and the grantor buy in their own name instead?
Yes. With a revocable trust, the grantor is the taxpayer either way, so personal vesting also preserves the exchange.
What if the trust is irrevocable?
Then it depends on whether the grantor is still treated as owner under the grantor trust rules. A non-grantor trust is its own taxpayer and must buy the replacement itself or through its own disregarded entity.
Can two LLCs owned by the same trust buy two replacements?
Yes, if both are disregarded and owned only by the trust; each purchase is still yours. Two LLCs buying one replacement together covers the reverse case.
Does the title company need to see the trust document itself?
Usually a certificate of trust is enough, but each title company sets its own requirements. Ask early.
Sources
Checked against these publications on September 30, 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.