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1031 exchange from California to Pennsylvania
All I am looking todo a 1031 to sale a property in California that is currently in a joint living trust as seller (husband and wife ownership) of the relinquished property. I have created a single member LLC (husband only) ownership for the replacement property in Pennsylvania. Is this going to be an issue? if yes what options do I have, not sure if I can add her name to LLC or need a new LLC for her and be 50/50 or other options. Want to get the llc protection moving forward in PA. We file our taxes jointly.
Thanks in advance.
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@Phil Yan, Your trust is a disregarded entity as long as it is a revocable living trust that does not file a tax return. So the tax payer which has to stay the same throughout the 1031 is you and your wife by virtue of the joint tax return you file.
Purchasing as a single member LLC is not a problem from the 1031 perspective either as long as the LLC is not being taxed as a partnership. Again, the LLC is disregarded and the tax payer is your joint return or you. However, it's always cleaner if even the deed is the same going through the 1031. It eliminates questions before they have to be answered. One answer would be to sell as the trust and buy as yourselves and then contribute the property into the LLC.
Community property issues can appear but for 1031 Pennsylvania doesn't recognize the 1031 for state tax purposes. So you'll really just want to make sure your staying OK with state laws regarding community property/equitable distribution or whatever hybrid PN happens to be.
- Dave Foster
