Found this prior discussion with a similar question:
viewtopic.php?f=8&t=6649Included in that discussion was a reference to
PLR201812012 PLR 200812012.
In this case, Trust terminated involuntarily by its own terms after many years in existence. Because Trust was a testamentary trust, the termination date was fixed by Decedent and could not be modified or changed. The Plan of Termination was approved by the State A Probate Court and would have occurred without regard to whether this exchange of properties had been consummated. Consequently, the like-kind exchange in this case was wholly independent from termination of Trust, and thus LLC's acquisition of the Replacement Property in a reverse like-kind exchange was wholly independent of its § 708(b)(1)(B) termination. Moreover, there has been no change either in the beneficial ownership of LLC, or in the way it holds or manages the Replacement Property. It has continued to own this property for investment purposes. Thus, the facts in this ruling request are distinguishable from those in Rev. Rul. 75-292 and Rev. Rul. 77-337, which involve voluntary transfers of properties pursuant to prearranged plans.
This particular situation includes the extra protective layer of holding the real estate in an LLC. The trust distributed the LLC interest to the beneficiaries. The LLC conducted the exchange.
However, the IRS does put value on 2 things here:
1. The trust termination is involuntary.
2. The transfer out of the trust is independent of the 1031 transaction.