question about dealing with a potential 1031 involving LLC vs. personal...
OK - I have 2 duplexes I plan to sell, and do a 1031 exchange to buy a larger multifamily, something in the 6 - 20 unit range, depending what i can find in a price I can afford.
My wife and I want to form an LLC as equal partners, but the duplexes I am selling are titled only to me (not my wife), which makes the 1031 problematic, since the new property won't be in the same entity. A single member LLC, from what i understand, would work, since it would fall as a "disregarded entity" but not a two member.
So what are my options?
My thoughts:
1. Move the duplexes to the new LLC before selling them, that way the 1031 involves the same entity. However, if I do this, would the IRS see that the duplexes went into the LLC only a few months earlier and consider this a problem, or, too "short term" of a sale and therefore call it an inventory sale instead of sale of a rental?
2. Create the LLC as a single member LLC, then, sometime down the road, add my wife as a new second member of the LLC. Would this work? If I did that, would that mess up my taxes for that year?
3. Buy the apartment individually, then move to LLC. Not sure the commercial lender I have in mind would like this, plus, the IRS can catch on here too, I've read about it.
We're in Ohio as are all properties in question, so its not a community property state.
Hopefully someone who has dealt with this can chime in.
Thanks!!