Property Holding Period?

3 Replies

My wife and I have just executed a 1031 exchange, however, all of the properties we purchased are currently listed in our own names. We'd like to get them in an LLC as soon as possible although the intermediary and the accountant say that we need to hold the property for two years in our names for tax purposes before we can put it in to an LLC.

Anyone have any thoughts on this?

Hey @Eric S. !

I don't know the answer to your question, but I do have a suggestion.

Have you set up your keyword alters yet? You could set "Ft Mitchell, Kentucky" as a keyword and get notified when someone mentions that area, then proceed to ask them your question in a private message.

You might try reaching out to: @Amanda Han She's a CPA that specializes in real estate investing, though I don't know if she does business in your state.

Best of luck friend!

I really don't know a definitive answer to your question, but I did a 1031 last year and we immediately moved the property to an LLC. I was consulting with a real estate lawyer/tax accountant -he was the guy who set up the LLC and arranged it with the closing agent. He knew it was an exchange, so I'm sure he would have spoken up if there was an issue. Perhaps this varies by state? My deal was in Ohio.

Hi Eric, the answer is that it depends on the tax filing status of the LLC. If the LLC is considered a single member LLC and therefore a disregarded entity for income tax reporting purposes, then you can do it right away. If it is not considered to be a disregarded entity, then you should wait the 24 month period that your tax advisor has recommended.

I'm guessing that you do not live in a community property state, which means that an LLC with a husband and wife as the sole members will likely be classified as a two person LLC (as opposed to a community property state where you would be classified as a single member LLC) and therefore a partnership for income tax reporting purposes (not a disregarded entity).

This creates the need for you to establish the 24 month holding period to demonstrate that the two of you have the intent to hold the property for rental/investment purposes.

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