Discussion:1031 Exchange to LLC
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Discussion Forum Index --> Tax Questions --> 1031 Exchange to LLC
| 19 July 2006 | |
| I have a client that owns a commercial building. She would like to do a 1031 exchange into an interest in an LLC. The only asset in the LLC is rental real estate. Can she do that or does the LLC have to be dissolved and create a Tenants In Common arrangement to effect the exchange? The other issue in this is that she already owns a 25% interest in this LLC and after the transaction she'll own 50%. | |
| 19 July 2006 | |
| No chance of exchanging into an LLC interest. See Sec. 1031(a)(2)(D). | |
| 20 July 2006 | |
| If the LLC is dissolved so that each member owns the property as TIC, then I think they can effect the exchange. Is that your understanding? | |
| 20 July 2006 | |
| Internal Revenue Service says your idea won’t work since the property was not held for investment by the LLC members. See Rev. Ruling 75-291. In addition, the step transaction doctrine would probably treat this as an exchange of a partnership interest.
However, the Ninth Circuit suggested in Bolker that a property received in a corporate liquidation was property held for investment for 1031 purposes. | |
| 9 January 2007 | |
| What if the seller is a SMLLC? Can somebody exchange into a 100% interest in a SMLLC? A SMLLC is a disregarded entity, therefore it would not be considered a partnership interest. Right? So what is it, then?
I have a client that needs to complete an exchange. The seller's accountant has advised the seller to not sell the property out of the LLC but to sell the SMLLC to my client. (I cannot figure out what the difference to the seller is and why the accountant would advise this.) Can my client purchase the SMLLC interest and complete a valid exchange? | |
| 9 January 2007 | |
| For a 1031 exchange, the entity that's selling the proerty must be the entity that purchases the new property. Therefore if an LLC wants to sell property, it can't be dissolved. You require the same name on the new deed. | |
| 9 January 2007 | |
| I confused you. My client is the "buyer" in this transaction. The seller owns their property in a SMLLC. The seller has been advised to sell their LLC interest. Can my client, the buyer, purchase the SMLLC interest and complete his exchange.
Of course, I think the answer is NO. But since a SMLLC is a disregarded entity, then it is not a "partnership interest". Right? So is it OK? I still think NO. | |
| 17 April 2007 | |
| I have a related question. If my client is one of three members of an LLC. Can my client buy the interest of one of the LLC member and together with the remaining member sell the property owned by the LLC via a 1031 exchange and buy a replacement property under the same LLC name? Is there a time separation recommended between the time of purchase of the interest of the one member and the time of the sale of the property owned by the LLC? Thanks. | |
| 18 April 2007 | |
| what about a h/w who own a property & want to do an exchange & contribute the property to a LLP? | |
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