1031 exchange

4 Replies

Can you 1031 exchange a property owned by your LLC into two properties you own personally. example below

Steve & Matt are partners on a 4plex. They change title of there 4plex to their LLC

Than they 1031 exchange there 4 plex now under the LLC name to two rentals they own together under there personal names.

They would now have ownership of there two rentals homes as the LLC? Is this allowed I know a little complicated.

The contribution of the 4-plex into the two-member LLC has changed the ownership from two individuals as tenants-in-common into a multiple member LLC, which is generally treated as a partnership for income tax purposes. There are ways to work around this if you have sufficient time to do so, but if you 1031 Exchange out of the LLC (partnership) and into the two of your names as individuals (tenants-in-common), the 1031 Exchange will not qualify because the LLC and the two individuals are considered to be two different taxpayers for income tax purposes.

You also cannot do a 1031 to a property you already own. 

Would the same rules apply for an S-corp?  My husband and I are each 50% stockholders in our farm's S-Corp.  The S-corp is selling property.  Can the S-corp 1031 exchange for property owned by us individually?

If you are asking if the S corporation can sell property that it owns through a 1031 Exchange and then turn around and acquire its replacement property from you as individuals, the short answer is no. 

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