1031 a personally titled property to a LLC titled property

[Phil Hong]

Hi BP!

I am considering selling a property owned in my name and buying a bigger property. I would like to have a single-member LLC own the new property. I read that the name on title for the upleg and downleg need to be the same. Is this possible?

Thanks!

Phil

[Dave Foster]

@Phil Hong, Yes you may do this but be careful. Its not just a single member LLC that is important. It must also not elect to file as an S corp or partnership. So make sure your accountant is in the loop (There's also some potential complications in a community property state).

The reason it works is that a single member LLC filing as a sole proprietor does not file it's own tax return. All activity of the property owned by the LLC is reported on your personal return. So the IRS looks at who the tax payer is not just who's on deed. So there is no difference between you or a single member LLC owned by you. In each case you are viewed as the tax payer so you do the 1031 exchange as yourself or as the LLC - however you want.

I get your strategy and it will work for the 1031. But there's another twist that might also be to your advantage. Instead of selling as yourself and buying as the LLC you could also sell as yourself and buy as yourself and then immediately after the purchase contribute the property into the LLC. This doesn't affect your 1031 and may skirt some community property issues as well as provide more advantageous financing.