1031 Exchange from individual to LLC

1 Reply

I am about two weeks away from officially starting an LLC with one other individual. Before forming the LLC that individual and I bought and are still in the process of flipping a house. The property is only in my name. I want to roll the sale of this property into another property that we we are looking to purchase with our LLC in about two weeks. It will be an owner finance purchase. Is there any way to pull off this 1031 exchange?? Any help will be much appreciated, Thanks!

@Damien Ramirez , Bad news chief.  First of all if by flipping a property you mean that you just purchased it with the primary intent of resale then it's not eligible for 1031 treatment.  Property eligible for 1031 is property that you purchased with the intent to hold for productive use.  It's going to be a little hard to demonstrated intent to hold when you already have a contract and your next property lined up.  If you can demonstrate that or if flip to you means something different then you might have an opportunity.

But beyond that, if you had held that property for productive use then yes, you could make a 1031 work but the order of things is critically important. In a 1031 exchange the tax payer for the old property has to be the same as the tax payer for the new property. And the IRS does not like tax payer changes right before a sale. Right after is no problem however. So the answer would be to form the LLC with your partner but sell the old property 1031 and buy the new property all in your name. Then immediately after the purchase you contribute the property into the LLC. Now it is an asset of the LLC so next time around if you want to do a 1031 it is the LLC that will have to do the LLC not you.

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