With a 1031 exchange, an investor can sell a property and as long as they follow a specific process, they can purchase another property while deferring tax from the gains of sale. A 1031 is applicable for any tax paying entity that can own real estate. One of the primary requirements of the 1031 exchange is that the taxpayer of the old property (the sold property) is the same taxpayer of the newly purchased property. However the caveat here is that the investors in a syndication purchase membership interests in the LLC and they themselves are not owners of real estate, but owners of shares of the LLC. The syndication itself is not considered real estate for purposes of 1031. What the passive investor can do, however, is the LLC can sell an asset and perform its own 1031 exchange to purchase another asset, with the investors deferring taxes as long as they remain members of the partnership when it purchases the next asset.