Exchanges with Partnerships, LLC’s and other Entities, Part 5

The questions here were received from interested 1031 exchangers visiting my website. I have chosen to leave the questions intact with their ambiguity, shorthand writing and misspellings so as not to act on the assumption as to what when unclear the questioner meant.

Exchanges with Partnerships, LLC’s and other Entities, Part 5

Any 1031 exchange deal has its own complexity, and trying to approach one of these exchanges with an LLC or partnership can make things even more complicated.

There are rules and regulations for LLCs and partnerships that aren’t in place with individual-based deals. Some of these have to do with how stakeholders in an entity distribute assets – with this strategy you need to plan ahead as there is a two-year time frame. Then there are rules around partners buying each other out that is sometimes called a “drop and swap” approach, where many states allow this process, but it’s illegal in California.

Basically, the 1031 exchange has evolved over time, and it’s been subject to additional oversight, but it’s also had dealmakers working to put together more sophisticated ways of working with the rules inside the system to make a 1031 exchange successful.

Question 1:
If I sell a commercial property can I exchange into a REIT ?

No kinds of property can be exchanged into a real estate investment trust. This process just doesn’t interface with that kind of asset.

There is an IRS 721 Up REIT rule requiring you to sell the whole property to the REIT. If the REIT ever sells your property out from the REIT you will pay all your taxes.

Question 2:
I am planning to sell an individually owned rental home. Can I Starker exchange into another rental purchase with another investor under an LLC? or do we need to show my name as an “individual” on the title to comply with 1031 rules?\n Do you provide 1031 services in Florida?\n\n

In order to comply with rules on 1031 exchanges, your name has to be on the title of the rental property. Your proposed partner can do a joint title, he with an LLC and your entity titled the same as in the property you sold.

About Marilee: Role of Marilee Hill, Registered Representative (RR)

Marilee Hill has particular experience with the nuts and bolts of a 1031 exchange deal as a licensed FINRA professional. Time and experience in this field translates into key support for customers and knowledge of the people side of the business, which is also important. Get free advice for a 1031 exchange deal and consulting on how to hire a qualified intermediary and more.

Marilee Hill, MA Hill