An Umbrella Partnership Real Estate Investment Trust, or UPREIT, is an entity that enables owners of appreciated real estate to contribute it to a real estate

Can you exchange income producing real estate for REIT stock using a 1031 tax-free exchange?

As many answers here have indicated, shares in a REIT are not considered real property, but securities. The closest thing to such an exchange is something called an UPREIT, explained below. But this trick is complicated and can only be done once.

What Is an UPREIT?

UPREIT means umbrella partnership real estate investment trust. An UPREIT is a unique REIT structure that allows property owners to exchange their property for share ownership in the UPREIT. However, UPREITs are generally subject to Internal Revenue Code (IRC) Section 721 exchanges.

Key Takeaways

  • An UPREIT is a unique REIT structure that allows property owners to exchange their property for share ownership in the UPREIT.
  • Property-for-share exchanges in an UPREIT are generally allowed under Section 721 of the Title 26 Internal Revenue Code.
  • UPREIT property contributors can defer taxes on the sale of property in exchange for UPREIT units, though capital gains taxes on UPREIT units are subject to standard REIT taxation.