Posted by Natalie-VA on July 19, 2007 at 08:43:33:
John,
I have sort of the opposite situation from the original poster. We did a 1031 exchange in the end of 2006. The property is titled in our LLC. I’m assuming this is a SMLLC if it’s just me and my husband and it passes through to our joint return. Am I correct?
It’s a rental now, but we plan to move into this property later this year or early in 2008. I would like to gift deed it over to our personal names. Do you see any issue with doing this after the exchange?
I will, of course consult my own CPA before I do anything, and I do understand the total holding period is now 5 years. I just wanted a second opinion.
If my husband and I sell a property that we jointly own personally, in a 1031 Exchange, can we then transfer the newly-acquired property into an LLC that we own 100% of? (We do live in a community property state - Texas.)
I read that we could do this if the “business entity is disregarded as a business entity”. What does that mean? Would it fail to protect us personally from liability? That is what we are trying to accomplish by transferring the property into the LLC.
Thanks for any light you can shed on this question.
If you transfer the property to an LLC which is NOT a SMLLC, you will not get the deferred gain treatment. Deal with a professional who is very experienced dealing with 1031s. I have a client who was working with an experienced QI and didn’t reinvest enough of the proceeds, triggering taxes!
The LLC is a “disregarded entity” for tax purposes. That means it goes on your Sched E instead of having to file its own tax return.
It is like a Corp for legal purposes, but there are ways a lawyer can get past the LLC and to you that no amount of preparation can prevent. An LLC plus a solid liability insurance policy is about the best you can do.