1031 exchange beneficial interests in trust

Dear Steve,
you asked me to e-mail you the scenario
here it is:
Property A is owned by Mrs. A., an older woman.  (Actually she owns the
beneficiary interest in a trust)  Property B and Property C are owned by
me(Mr. B).  Property A is in a trust with Joe trustee as the trustee.
Properties B and C are in another trust with David as the trustee (my wife
and I being the sole beneficiaries).  The only thing in these trusts is the
subject property.  Property A's value is conservatively $400,000.
Properties B and C are worth conservatively $200,000 each.  Can we just
switch the beneficiary interests in these trusts and count that as a 1031
exchange?  Would the trust not be a disregarded entity for tax purposes
because it was owned by individuals?

Dear B:  I am not sure why you think that it is a better idea to swap beneficial interests in the trust rather than have the trust swap properties.  To me it makes much more sense for the trust to swap properties rather than swap beneficiaries.  Swapping beneficiaries does not make sense to me.  If you did that you would have "Joe" as you trustee and the elderly woman would have "Dave" as her trustee.  This makes no sense to me.  As far as disregarded entities is concerned I would like to know about each trust.  Does either trust have a separate tax ID number, and file a separate tax return.  I still think that the best thing would be for the trust to swap properties with each trust doing a 1031x.  I hope we can help with this.  Sincerely,

Steve Hickox
Attorney / President

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