1031 from one property to another property that I already own.

Allentown, Pennsylvania
1031 Exchanges
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1031 from one property to another property that I already own.

Casey WalkerPro Member
Contractor · Member since 2019 · 51 posts · 21 votes

Hello,
I have  a1031 question.
If I sell one of my properties, can I 1031 into another property that I already own in my personal name if I change the ownership to an LLC?

I think if I change a property that I own in my personal name to be owned by an LLC that I own I would have to pay the 2% transfer tax. So it looks like they view that as me selling it from me to the LLC. If I did this would I have to pay capital gains tax on this property?

At the same time could I sell the first property and 1031 into this property I am putting under an LLC?

I apologize that this is confusing.
Thanks Casey

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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    2y

    Nope. Not if it's a disregarded LLC like 99% are. Same tax payer means it's not a sale.

    Ps. If it wasn't a disregarded LLC that LLC would owe all the capital gains tax from their sale anyway. Talk to an expert like @Dave Foster to find out if there’s a work around but doing it and then having it cancelled by the IRS a year or two later would be less than ideal. 

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    2y

    @Casey Walker the 2% transfer tax you're talking about is a state thing.  Yes you're changing the deed.  And there are circumstances where it would be considered a sale.  But in order to do a 1031 you have to be buying from someone else.  Like @Bill B. said, if the LLC doesn't file a tax return then it is still reported on your personal tax return. So according to the IRS you are buying from you. And if the LLC does file a tax return but you are the only member then you're buying it from an entity controlled by you. So, even though it may change the tax return reporting the property it is still just you.

    If the LLC is a multi member LLC and you do not own more than 50% (or you and your wife) then you might have a case to buy that property to complete your 1031 exchange.

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  • Casey WalkerPro Member
    OP
    Contractor · Member since 2019 · 51 posts · 21 votes
    2y

    Ok,

    That makes sense.

    Thanks for the reply.

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