Selling LLC interests AFTER 1031 Exchange
Our family trust did a 1031 exchange 5 years ago, one of the assets we acquired was a parcel. We want to develop the lot now and build a short term rental, preferably owned by an LLC. I read the answers here and don't see anything problematic if we simply transfer the lot to the new LLC, and sla as the Trust is the only owner of the LLC. But what if we want to sell interests in the LLC after its formed to help subsidize the build? Is that going to be considered partially redeeming the exchanged property? If so, any suggestions on what alternatives we should consider? We have invested a considerable amount already into the to-be-built plans, architects, engineers, etc. Suggestions welcomed.
This is definitely a question for your CPA and your SEC attorney.
From my experience, it would seem easier to leave the property in the trust until you are ready to bring the investors online. At that time you could launch the LLC. Their contribution to the LLC would be cash and yours could be the property and pre-construction work (and maybe some cash). This would eliminate the appearance that you have "sold" a portion of the property.
appreciate you taking time to reply, that's very considerate
I was going to put the property in the LLC anyway for the normal reasons - I don't think there's any harm in that for now, I'll keep consulting for the main point for what parts might look like a "sale" of the property.
