10-31 as LLC - “Swap and Drop”

[Collin Wilson]

I am hoping to get some guidance on a 10-31 exchange. My ex-wife and I own our previous primary residence (don't meet the standard for the exclusion). We turned it into a rental in 2019 and transferred it into a LLC. We are now looking to sell the property. The property has appreciated well and we are looking at a decent amount in capital gains. It's my understanding that we can utilize a 10-31 as a LLC and after we acquire the new property we can drop her from the LLC and I could pay her out her portion of the investment. I recognize people will likely frown at the situation, but I'm looking for whether this is feasible and any folks who have utilized this approach. As always, guidance is greatly appreciated.