REAL ESTATE CROWDFUNDING EXPLAINED

No. Debt-based crowdfunding platforms typically pool capital into loans secured by real estate, and investors hold a debt instrument rather than real property, so this structure does not qualify for a 1031 exchange under any circumstances.

Generally no. Most equity crowdfunding platforms pool capital into an LLC or LP that acquires the property, and investors receive a partnership or membership interest, which is explicitly excluded from like-kind property treatment under Section 1031, even though the underlying real estate would otherwise qualify if owned directly.

A small number of platforms structure specific offerings as Delaware Statutory Trusts under Revenue Ruling 2004-86, which can potentially qualify. This is not the default structure, so a Boston, MA investor needs to confirm the specific legal structure of an individual offering before assuming 1031 eligibility.

Equity crowdfunding typically uses the same LLC or LP structure as a conventional syndication, issuing investors a partnership or membership interest rather than direct title to real property, which triggers the same statutory exclusion of partnership interests from 1031 treatment.

No. Most crowdfunding structures, whether debt-based or conventional equity, will disqualify a 1031 exchange if used as replacement property. The specific legal structure of each offering should be confirmed with a securities attorney or licensed provider before committing exchange proceeds.