sell rental, 1031 exch, purchase current primary home under LLC

[Matthew Belcher]

Wondering if it is legal for tax/capital gains to do the following:

Sell a current rental property in my portfolio (1031 exchange the profit), structure an LLC to purchase my current primary residence from myself (would be selling my primary home to a business that I now own) utilizing the 1031 exchanged money for the large down-payment; therefor I would be able to pull out capital gains tax free under the IRS primary residence guidelines (250K single 500K married).

I understand that I would no longer have a primary residence but I will be purchasing a new primary residence and renting out the property newly owned by the LLC within a few months after the sale.

Thanks in advance for any information!

[Steve Vaughan]

The definition of like-kind property to be exchanged into is pretty liberal, but it has to be income producing to income producing.  No primary's.  This has self-dealing and other no-no's written all over it.

I would consult a tax professional, which I am not, but my guess is you're a headin' fer trouble, pilgrim!