question about 1031 exchange and legal entities.

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question about 1031 exchange and legal entities.

Account Closed
Member since 2019 · 18 posts · 5 votes

Quick question about 1031 exchanges and legal entities: 

If hold title to a property in my own name and sell the property with a 1031 exchange am I allowed, at any point, to transfer the new investment property into an LLC or will I lose the tax deferment by doing so? Is there a holding period before I am allowed to do so? I typically hold title to investment properties in an LLC but the particular one that I am selling happens to be in my personal name.

Any advice or information is appreciated. Thanks in advance!

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    7y
    Originally posted by @Account Closed:

    Quick question about 1031 exchanges and legal entities: 

    If hold title to a property in my own name and sell the property with a 1031 exchange am I allowed, at any point, to transfer the new investment property into an LLC or will I lose the tax deferment by doing so? Is there a holding period before I am allowed to do so? I typically hold title to investment properties in an LLC but the particular one that I am selling happens to be in my personal name.

    Any advice or information is appreciated. Thanks in advance!

    If it is a SMLLC, you will not lose the 1031 deferral. If its a partnership, yes you have to be careful and structure and time it property. 

    But, I am guessing its a SMLLC so you are fine.  

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    7y

    @Account Closed. The only other issue you want to watch out for is to make sure that single member LLC elects to be taxed as a sole proprietor. That way the tax payer doesn't change. That makes the LLC "disregarded" and the true tax payer fo the property is still you (or rather your tax return where the activity of the property is reported).

    If you're wanting to contribute that property into a different regarded entity (with or without other partners), there's no holding period after a 1031 is complete.  Just work with your accountant as Ashish said so the formation of a new entity and the contribution into the entity doesn't inadvertently trigger a taxable event.

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  • Account Closed
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    Member since 2019 · 18 posts · 5 votes
    7y

    Thank you both, @Dave Foster and @Ashish Acharya, for your explanations. That's what I was hoping - that I could transfer the new property after closing, into a disregarded, single member LLC, without triggering a taxable event. I appreciate your quick responses and expertise on this matter!

    All the best.

    Seleem

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