Hello BP!

Looking to connect with Drop & Swap expert - Real Estate attorney and/or CPA

Looking to combine Drop & Swap, 1031, and TIC purchase.

30,000 feet view-

-Ki and Daniel each owned their rental properties individually in their personal names
-Ki and Daniel each sold their rental properties in their personal names and are doing 1031 exchange
-Ki and Daniel decided to collaborate on the 1031 exchange by combining their funds to buy a larger deal for replacement asset.
-The 1031 QI advised that the best structure to do this is to take title to the replacement property as TIC.
-We have an apartment under contract and its in the Franklin County, OH
-Ki and Daniel each have our own individual, single-member, disregarded OH LLCs
-each OH LLC's are also owned by respective WY LLC's, also single-member and disregarded.
-The

plan was for Ki's OH LLC and Daniel's OH LLC to take title as TIC for

the replacement property, and each of our OH LLC's will be owned by our

respective WY LLC's

NOW....

-We want to do a drop &

swap where the seller puts the title of their asset under a new LLC, and

then we buy the membership interest in the new LLC instead of "buying

the property." This can potentially avoid new tax assessment of the

property that is triggered by a sale, thus saving taxes for the buyer,

and saving the sellers transfer taxes.

- from our understanding,

combining 1031 and Drop & Swap is possible when it's dealing with

single buyer who takes 100% of ownership interest of the newly formed

LLC as single-member and disregarded.

- what we want to explore

is the possibility of doing the drop and swap and 1031 when we are

purchasing the replacement asset as TIC. So when we buy the membership

interest of the new LLC, it will not be single-member LLC, but both of

us will be owners of the newly formed LLC. How can we structure this

properly so that it's Kosher for the IRS and so that the integrity of

the 1031 will not be compromised?

If there are any expert RE lawyers or RE cpa's out there, I'd love to connect.

I would first recommend consulting an Ohio based attorney (not just Ohio licensed). I would recommend Steve Robison. He is a 1031 agent and attorney who specializes in real estate and taxation law. He assisted us on a rather complicated 1031 lately that set up similar to your scenario.

Secondly, if you are buying in Columbus, I would move carefully on the drop down LLC. See the case citation I attached below. The school district in Columbus is on the prowl for these types of transactions and are aggressively going after people for these transactions. Columbus and Cleveland are getting tough to do the drop down entity transaction. It is not as bad in Cincinnati still, but that could be changing soon.

Read the case. I almost would recommend that the safer way to go, especially in Columbus, is to do a personal property carve out

Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2020-

Ohio-353.]

Originally posted by @John Lenhart :

I would first recommend consulting an Ohio based attorney (not just Ohio licensed). I would recommend Steve Robison. He is a 1031 agent and attorney who specializes in real estate and taxation law. He assisted us on a rather complicated 1031 lately that set up similar to your scenario.

Secondly, if you are buying in Columbus, I would move carefully on the drop down LLC. See the case citation I attached below. The school district in Columbus is on the prowl for these types of transactions and are aggressively going after people for these transactions. Columbus and Cleveland are getting tough to do the drop down entity transaction. It is not as bad in Cincinnati still, but that could be changing soon.

Read the case. I almost would recommend that the safer way to go, especially in Columbus, is to do a personal property carve out

Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2020-

Ohio-353.]

Thank you, John!  I will reach out to Steve.