1031 exchange

[S T]

Does anyone know???

Husband and Wife sells a commercial rental property using 1031 exchange. Time limits, amounts etc are all met.

Part of the criteria for meeting the 1031 exchange is that title from the relinquished property must be the same on the purchase of the replacement property.

So title from the relinquished property John Doe & Mary Doe, h/w as jt was used on the replacement property.

Now the question????? Since the transaction is completed and recorded, can John Doe & Mary Doe h/w as jt now form Doe Investments, LLC??? Other factors are that the property relinquished had no mortgage and the replacement property was purchased NOT subject to Mortgage (so no loans to deal with). H/W would be the only members of the new LLC!

I would hope this would not fall under the related party rules of 1031 exchange????

Sandy

[Black Bart]

Hi,

Sorry to beat your post out of "first place," bur maybe this one will put it back so somebody will answer. As you might imagine, I know nothing on the 1031 subject, so----sorry.

Just thought though--ny new seminar book has an entire chapter on 1031 and LLC's too. I'll check tomorrow and see if there's anything in them. It's a great hands-on books for tax seminars (from University of Illinois) and, although written by farm college profs, about 90% of it applies to other biz too and it's very much in plain English, detailed (lots of examples & explanations). Looks nothing like, say, the scholarly CCH tomes--in fact, looks like somebody next door wrote it. Now, with that glowing recommedation, I probably won't find a thing--still, Bees or Beau probably have the whole thing in their heads right this minute and it may not be necessary at all.

I've got to hit the hay. Ran flat out and full blast today and am dead. Later.

[S T]

Thanks Bart

Thanks for watching my posts!

Oh the tangled web that our clients weave! I don't know the answer either so hopefully someone else will. The question was posted because of the conversation with an attorney and a mention of a "2 year rule" I only seemed to find the "related party rule"

So Bart, if you just attended a 1031 seminar any enlightenment and sharing would be most graciously appreciated.

Sorry you are so tired and not "up all nite" answering posts! I would be interested in what you learned also on the LLC issues.

Thanks

Sandy

[jainen]

no, they can not

I do know the answer. It is no, they can not put their replacement property in an LLC. It is well-established that the entity must remain the same across a 1031 exchange. Although an LLC is a disregarded entity, it will be considered either a corporation which is separate from its shareholders, or a partnership which is specifically excluded by Section 1031 (a)(2)(D). Therefore the exchange will fail if the property is retitled within a time frame that steps the exchange and the transfer to a single transaction. This is generally at least two years, but could be less if you can show that unexpected external events altered the original intent.

[Black Bart]

Yo, jainen-doggie (is the dash required?)

I do know the answer. It is no, they can not put their replacement property in an LLC. It is well-established that the entity must remain the same across a 1031 exchange. Although an LLC is...

I know you already know, but for the less-than-trendy crowd--that's "Hello" in California-talk. The "Yo" ("Hi" out there) is "Hey" here and the "doggie" part is---well, you know, it's that Moon-doggie movie I told you about. Oh, I told a local momma--her boy(age 44)'s name is "Moon" too--about how y'all add the catchy "doggie" part to names out there. Well, she took right to it and is goin' straight to the courthouse first thing tomorrow and get it fixed. She said, and I quote, "If'n there ever wuz a humin bean thass uh dawg, he's it! Y'know, talkin' to them kids today lock 'at, them beach boys ain't as crazy as ah heared, even if they do pay uh hunnerd dollars fer uh little-bitty lot."

Okay, I'll quit. That's the last you'll hear of "California." I know I've a tendency to overdo the corn-grinding until it becomes tedious and besides, I think some things out there seem just as wacky to you as they do to everybody else. And, to give credit where due, your state must be doing something right, as it frequently is a major contributor to almost every important development (scientific, social, military, etc.) in the U.S. whereas all we have to flaunt is the Tyson chicken factory and Bill's not-so-lurid library (Monica's been deleted).

Now; to show you my heart's in the right place, I'll say nothing of your horning in and showing off how much more you know about LLCs and 1031s than I do (not to mention quashing my chances to show off my new "seminar book"). I haven't had a good, tough argument in a while and feel like a boxer needing a work-out. Also I wanted straight talk from one who wouldn't pull punches, soften the blows, or burden opinions with unnecessary sympathy (you know-the milk of human kindness) and illogical emotion. Naturally, I thought of... Mr. Spock (just kidding--I meant you).

Please refer to the next thread (I'm trying to get attention with the title).