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Real Estate

§721 UPREIT Exchange

Contribute property to REIT for OP units — defer gain, gain liquidity path.

Overview

Under §721, contribute appreciated real property to a REIT's Operating Partnership in exchange for OP units (economically equivalent to REIT shares). No gain recognized. You get diversification (own the whole REIT portfolio), professional management, and future liquidity via conversion to REIT shares (which is taxable, but you control timing). Often used after DST 1031 chain.

Best fit
Long-term landlords seeking exitDiversification-seekersEstate-planning real estate holders
Estimated impact
Defer 20–37% cap gains + gain liquid path + step-up at death

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