1031 into a LLC - Posted by Omar

Posted by Jeff M on September 18, 2002 at 22:03:45:

I AM NOT A LAWYER! However, I did some research about 1031’s before, and, to my knowledge, you ABSOLUTELY CANNOT “take the proceeds”. You need to hire what is called a 1031 intermediary, who takes care of the process. If you touch the proceeds, YOU GET TAXED. Just thought you should know, but get better information from John or someone else here who can explain the process. Good luck.

Jeff M

1031 into a LLC - Posted by Omar

Posted by Omar on September 18, 2002 at 21:40:39:

I have just put 2 rental properties onto the market in Minneapolis. I am planning on taking the proceeds and 1031ing them into a larger rental unit. I have talked with my father about pooling our resources and getting an even larger unit.
My question is, my money is 1031, and his is not, can we do this with an LLC? If this works, does it differ from other parterships?
Thanks for your 2 cents.

Re: 1031 into a LLC - Posted by JHyre in Ohio

Posted by JHyre in Ohio on September 19, 2002 at 05:50:50:

IF you use a qualified intermediary, it can purchase a partial or complete interest in replacement property. That partial or complete interest can then be contributed to an LLC in which others have an interest. CAVEAT: The IRS has challenged the part of the transaction where contribution is made to an LLC…though they have lost all such challenges in the past. You cannot DIRECTLY exchange into an LLC - but you should be able to INDIRECTLY do so, particularly if the LLC only owns real estate.

John Hyre

Re: 1031 into a LLC - Posted by Nate(DC)

Posted by Nate(DC) on September 18, 2002 at 22:43:24:


I really should let John answer this, but what the hey. He can correct me if I’m wrong.

You can’t each buy an interest in an LLC because you would be not be doing a like-kind exchange. Instead of exchanging real property for real property, you would be exchanging real property for an interest in an LLC.

If you want to co-own the building, you have to buy it as tenants in common. But if you do so, your plan should work.

John, is that right? :slight_smile: