Accidently got the 1031 exchange New property under my name

Chicago, Illinois
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Accidently got the 1031 exchange New property under my name

Ravi Singh
Hoffman Estates, IL · Member since 2017 · 1 post · 0 votes

Hi 

I sold 2 condos (one 100% owned by my LLC and the other was in my personal name with only 20% down payment and rest loaned a year ago from bank). When i did a 1030 exchange for both of them, i did not realize that the sale was done to my personal name. I own the new property 100%, but need to get the ownership of the townhome in question deeded over to my LLC.

Will this create issues with tax deferment which i would have with my 1031 exchange ?

I am the single owner on my llc, 

Ravi

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  • Bill ExeterBusiness Member
    1031 Exchange Qualified Intermediary · San Diego, CA · Member since 2008 · 1k+ posts · 1k+ votes
    5y

    Hi @Ravi Singh, 

    If the LLC is a single member LLC and a disregarded entity, then you should be OK because it is treated as if you are the owner of the real estate anyway. The sale out of your LLC and the sale out of your personal name and then the subsequent purchase in your personal name would qualify as long as the LLC is a single member LLC and disregarded entity with you as the sole member.

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Ravi Singh,

    I get the sense that your real concern is that you wanted the second property to be consistent in titling with the LLC being on title either for lending or liability purposes. That would be the norm for a 1031 and it's troubling that the question of entity never came up during your exchange. But while the 1031 may still be valid that's not your your primary concern.

    Fortunately deeding is a state convention. You communicate with the IRS through your tax filings. So correcting this error is a relatively simply manner. It is completely appropriate and will actually be invisible to the IRS because if the LLC is truly disregarded the property will still be reported on your personal tax return where it always has.

    A simple corrective quit claim deed is all that's needed.  

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