1031 exchange construction

[Carey Branam]

We bought an uninhabitable house in Montana this winter that we have been plugging away at little by little while still working full time.  We would really like to just finish it up so we are wanting to sell one of our rental houses in Kansas.  I’m pretty sure we’ll have to pay capital gains but thought I would look into 1031 exchange.  

Is there any way to sell the rental house in Kansas to fund this project?  We have a 20k note on it and need at least 50k for repairs.  It will be used as a rental as well.  We should have done the 1031 exchange when we bought this property but the kansas property has gone up in value quite a bit this spring.  We really hadn’t even considered selling it until now because it’s a block from a college campus.  

Could we move the Kansas property into an LLC, sell it, then purchase the Montana property with the LLC from us as individuals? We have not set up an LLC yet.

Any other way to use the sale funds for our Montana property and lessen the capital gains punch?

Also- who do you go to for this types of questions?  My accountant is not much help- a lawyer?  Title company?  New accountant?  Not sure who is the most versed in 1031 and tax laws.

[Jeff Nash]

That Montana property is not new to you so you it won't be eligible to use as your replacement property for a 1031 exchange.  There are improvement exchanges where additional construction occurs on the replacement property, but since you already own the property that is not applicable.  I would be happy to discuss other options and will PM you.