rental property and LLC 1031 exchange

Forum|Forum|3 years ago
June 28, 2022
2 replies
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Hello

I own a rental property in Texas. want to sell it.

i have my LLC that does real estate investment.

can i sell my personal rental property to my own LLC. then my LLC can sell the property in the market.

suppose i sell my property for 500K to my own LLC and then LLC can sell the property in the market. since LLC bought this property for 500k there is no capital gain so there is no tax.

advise.

TurboTax Home & Biz Windows

Best answer by Anonymous_

Agree. Can I buy another rental property through 1031 exchange using a proper intermediate 1031 exchange company. Then sell it off in 1 year?

@chutki0700 wrote:

Can I buy another rental property through 1031 exchange using a proper intermediate 1031 exchange company. Then sell it off in 1 year?

Yes, you can do a 1031 exchange and then sell the replacement property after one year but you need to understand that you will have to recognize any capital gain (and recapture) at the time of that sale (i.e., for that tax year).

A 1031 exchange only delays recognition of gain, it does not eliminate it forever.

Carl11_2

Employee

Assuming a single member LLC, the IRS considers your LLC to be a disregarded entity for tax purposes. Therefore you can not sell something you already own to yourself. Additionally, transferring ownership of the property to the LLC has it's own legal issues that have nothing to do with taxes, and will make absolutely no difference on the tax front.

chutki0700Author

Agree. But only f the LLC is a partnership. But if it’s a s corp then it is a separate entity.
And it can buy property form me.

basically I am looking how I can save on capital gain

Critter-3

@chutki0700

What you are trying to do is called tax evasion which is a federal offense. I highly recommend you seek local professional guidance to understand the intricate tax law you are trying to navigate. Best you could do is push the gain forward using a 1031 exchange but it has to be to an unrelated party which an S-Corp you own would not be ... the IRS has strict rules in place to keep you from trying this kind of "tax avoidance" maneuver.

Mike9241

not to mention that a title transfer would involve incurring some significant fees. don't know if there's a mortgage on the property but if there is transfer can invoke the due on sale clause.

now if you're talking about a 1031 exchange the other part has to be unrelated and there are specific steps you have to take otherwise what you thought was a 1031 becomes completely taxable.