1031 exchange with different LLC but same shareholder

Member since 2021 · 3 posts · 1 vote

I have 2 rental properties. One is under A LLC and the other is under B LLC. Both LLCs have the same shareholders. My questions are:

1. When we sell both properties, can we do 1031 to buy one property under B LLC only? That means can we change A LLC to B LLC in 1031 as long as they have the same shareholders? We don't want to do tenant-in-common in this case.

2. All the shareholders are my family members. Can we gift all the member interest to our family trust and still qualify 1031? Shall we gift the membership interest before or after 1031?

Can any of the 1031 experts give us some advice? Many thanks.

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y
@John Hugh, Even though they are the same share holders, LLC A and LLC B are two different tax payers. So each LLC has to do the 1031 exchange and take title to the new property. You can certainly use gifting tools to consolidate the properties after the fact. I would recommend doing it after the fact to avoid complicating the 1031.
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John Hugh
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Member since 2021 · 3 posts · 1 vote
4y
Thanks for the comments @Dave Foster. When you say using gifting tools to consolidate the properties after 1031 exchange, do you mean deed property under LLC A and LLC B to trust directly? Since trust is a different tax payer (has its own TIN), will this trigger capital gain tax dues?
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y
@John Hugh, There's so many options. It's all about which your accountant feels is more beneficial. It could be a merger of the LLCs, or a dissolution of one into the members names and then into the second LLC. Or since both LLCs are the same members there may actually be the opportunity to do some dissolving and gifting or gifting of interest.

The gifting and consolidation processes will occur after the 1031 is complete so won't have any impact on. it.
I just sent a colleague request if you'd like to process more off line.
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