All Forum Posts by: Scott Wolf

I’ve searched the forums but can’t find an answer. I’m hoping a season investor or CPA can chime in.

I currently hold title in my own name and have a mortgage in my own name. I'd like to sell my property in a 1031 exchange and hold title on the next property in the name of my newly formed LLC. Can I do this by completing a quit claim to the LLC before sell the initial property? Are there any adverse tax consequences to doing so since I've taken depreciation for 3 years already? Or is the tax deferred as it would be in a traditional 1031?

Additionally, would you recommend a quit claim before or after the 1031 exchange is complete and why?

@Scott Wolf

Hey Scott. I’m a tax accountant for my day job, so my tax professional gave me the thumbs up on this one! Haha 

Hi BP Community!

I just want to share a strategy I used on a property I closed on yesterday. Please feel free to critique/ point out anything I'm not seeing:

I sold a rental property over the summer that I had a low basis in relative to the sale price (due to a low purchase price, rather than accumulated depreciation). I decided to 1031 the proceeds. 

I closed on the replacement property yesterday: A 13 unit MHP. 7 units are park owned, 3 are tenant owned, 3 are on rent to own agreements. 

Trailers are considered personal property, land and land improvements are real property. Real property can be the replacement property in a 1031 exchange, personal can not. In reality, I paid one price for everything (trailers, land and land improvements), but for purposes of the 1031 exchange I had to separate it out, 150k for trailers and 310k for land and improvments. 

What has me pumped is that I can claim 100% bonus depreciation on the trailers and wipe out a ton of ordinary income with the tax loss. The 1031 is still legit since it was for the purchase of the land and land improvements. Also, the purchase price assigned to the land will have a carryover basis much closer to the purchase price than it would, had I exchanged into the full purchase price of the MHP, or an alternative type of real estate with a similar purchase price. AND the land improvements are 15 year property, allowing for more aggressive depreciation. I get it that a decent portion of the 310k will go to land value which isn't depreciable, but I'll have much more depreciation and much faster depreciation than I would if the replacement property was something other than a MHP. 

Let me know you thoughts. Thanks!

My current 2-family Brooklyn home:

Bought it in June 2004 for 500k and started house hacking from day 1. Previous owners needed a place to stay while their new home was getting finished so they rented the second apartment. 

I lived in the duplex apartment with the garden, and I had a roommate.

The top floor apartment rented with LTR until 2011.

Then I started doing Airbnb in 2010. First in my duplex (I moved to my roommate's bedroom since he moved out) and I gave my bedroom with its own living room to guests. That cash flow 3k a month. 

The second apartment tenant moved out in 2011 and I started Airbnb.

With just those two listings I was grossing 100k a year. In 2019 it was 130k. 

Now I'm selling the home for 1.8 million.

I have invested about 250-300k in the property through the years.

The best deal so far but let's talk next year after I 1031 the capital gain.