1031 exchange with LLCs involved

3 Replies

We are in the process of selling 5 SF properties in VA and acquiring 1 MF in FL. The VA properties are held in two separate LLCs, 3 in one and 2 in the other. The purchase price of the MF in Florida is much higher than the proceeds from all 5 VA properties combined.

For the 1031 to work, I am told that the 2 LLCs be Tenants in Common in the FL property using the appropriate ownership percentages. Will this approach work?

We also wish to add a third LLC in the TIC which will be responsible for a loan for the FL property, actually it will be serving the seller financing. Hope all this makes sense, things we do to defer taxes!

@Nagesh Kakarlamudi , Depending on the nature of those LLCs that may not be needed. If you are the only member of those LLCs and they do not file their own tax returns then they are what the IRS calls "disregarded entities". The real tax payer is the tax return that reports the activity of the property. If so then you can sell as the LLCs and take title as yourself or as another disregarded LLC and not change the tax payer. That would be fine.

If they are regarded then they would need to take title to the new property as tenants in common.  That too is not a problem.