Holding rentals in an LLC and 1031 exchanging.

Investor · Grangeville, ID · Member since 2017 · 85 posts · 34 votes

My accountant informed me that if I hold my rental in an LLC, and I 1031 exchange it and I die there is no step up in basis. I would have to hold it personally for my family to get that tax forgiveness. Any other downsides to holding real estate in an LLC?

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
8y
@Joel Brown, It's a conundrum for sure. Not thinking to argue with your accountant but to raise a point that's being considered other places: It may make a difference on the nature of your LLC. If it is a disregarded entity there's a school of thought that the Schedule E values are indeed stepped up as the LLC is disregarded.
In any event it is the nature of holding that is your issue. Whether or not you perform a 1031 exchange will have no bearing on the step up.
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