Posted by Bill on October 14, 2005 at 19:47:36:
Mr. Exeter,
You say it, “May” be considered a separate legal entity. I read that as it possibly “May” not be considered a separate legal entity. Under what circumstances would IRS not consider it a separate legal entity and allow us to change the way we hold title without penalty?
Exchange question - Posted by Bill
Posted by Bill on October 10, 2005 at 13:37:04:
I presently own a SFD and hold title to the dwelling in a mom and pop LLC. I exchanged into the property two years ago. I want to transfer the title to my family trust and make the house my personal residence.
My Question: When I change the way I hold title, is this transfer subject to capital gains tax.
Thanks in advance.
Re: Exchange question - Posted by dealmaker
Posted by dealmaker on October 11, 2005 at 07:56:45:
I’m not a CPA, just a guy who’s done a couple of 1031s so take my advice in that vein. I’m pretty sure the transfer WILL trigger a tsxable event.
However, if you’re going to make it your residence anyway, do what we did on our last exchange. Go ahead and move in, it’s been rented for 2 years so no problem there. Once it’s been your residence for 2 years, plus the 2 years of rental you’ll be 80% of the way to your goal.
Last year’s tax change affected people in your (and my) situation. A property that was acquired via 1031, that becomes a personal residence, must be held for A TOTAL OF 5 YEARS before sale in order not to trigger a taxable event.
Check with your CPA, or one that knows section 1031, before committing.
dealmaker
Warning: Be Very Careful - Posted by William L Exeter
Posted by William L Exeter on October 14, 2005 at 09:10:20:
In order to take advantage of this Section 1031/121 combination the taxpayer must have OWNED the property AND LIVED in the property for at least two (2) years out of the last five (5) years; AND under the new changes enacted under the October 2004 Tax Act must OWN/HOLD the property for five (5) years total before selling and taking the 121 exclusion.
In this case, the question is who owns the property. It is currently held by a multi-member LLC which may or may not be considered to be the same as the taxpayer. Simply moving into the property in order to take advantage of the 121 exclusion may not work because the property is not owned by the taxpayer (the LLC may be considered to be a separate legal entity and not the same as the taxpayer). You need to meet with your tax advisor before acting here.
Bill Exeter
Re: Exchange question - Posted by Bill
Posted by Bill on October 11, 2005 at 15:46:52:
Im aware of the new law about holding periods. Im not going to sell it anytime soon, just change the way I hold title. Just wondering if changing title from my LLC to my family trust would trigger a taxable event.
Thanks