1031 followed by quit claim deed

[Nishan Akwalia]

Hello

I’m currently in the process of selling a home and am under contract to purchase another home using 1031 exchange.

The home I'm selling is under mine and my wife's name personally. I understand to compete the 1031 exchange the purchase should also be in our personal names. I'd like to quit claim deed the home shortly after the 1031 exchange to an LLC solely owned by myself.

1. Will this cause any tax consequence to my wife? (we file married).

2. Would this cause any tax implication towards a future sale  of the home purchase? Or would I have to quit claim deed it back to our personal names?
3. Would taking a commercial loan on the new home with an LLC be an issue?

Please note I’ve sent an email also over to a CPA but wanted to hear from those that may have been down this road before
Thanks

[Dave Foster]

@Nishan Akwalia The most important factor is actually who the tax payer is for the property. This really means, what tax return reports the activity of the property. If you take title to the property as an LLC with you as the only member (and that elects to be taxed as a sole proprietor) then the property will still be reported on your joint tax return and that would be fine.

When you sell you can sell as that LLC and buy as the same LLC or another disregarded LLC, or as you, or as you and your wife, or as just your wife. In all of those instances the activity of the property will still be reported on your joint tax return.

No tax consequences for you or your wife.

Many times a commercial lender will require that you take title as an LLC or other business entity. This is where actually taking title as the disregarded LLC rather than waiting till after you purchase could come in handy.