1031 EXCHANGE

[mike9]

Can the replacement property be owned by a new LLC owned by the original seller (relinquished  property)and a new Investor. The new investor ( unrelated) do know about the reduced basis.

Does this invalidate the 1031

Thanks for your  kind guidance 

M

[Just-Lisa-Now-]

You may want to explain what you mean a bit clearer, are you asking if it can be a 1031 exchange from a single person to a different type of entity?

[qbteachmt]

Or, if a seller of a wholly owned property is a partner in an LLC that is a buyer, can that purchased property be their 1031 replacement property?

Which ignores that the purchasing LLC is a different entity than the seller. A partnership LLC is not a disregarded entity. Even if the seller had a single-member LLC, it's still not the same owner of the property. Just because it looks like LLC-to-LLC with the same member in each LLC. Is that where you're confused?

[mike9]

I was not  confused My clients partners "CPA "is advising that this is OK. 

or some trusts. I think the code proscribes changing ownership unless it is between.  married community property owners or certain trusts or publicly owned partnerships ( i am not sure about this )

[mike9]

Seller   owns a property elects 1031 and sells his property. Intermediary places proceeds into an LLC ( owned by seller and  a new member) and LLC purchases the replacement property within time windows. 

Yes the question is exactly that 

[Taxes-by-Rocky]

Isn't the existing owner simply contributing a property he/she already owns into a partnership?  You may have an IRC Section 704(c) issue and have to pay a 'stamp tax' but I'm not sure you have a taxable event under IRC Section 721.  Further, not sure IRC Section 1031 applies at all.  How much ownership is the existing owner supposed to receive?  Is the existing owner going to receive a distribution from the partnership (i.e., a disguised sale transaction)?

"Long Live IronMan"

[qbteachmt]

"I was not confused"

But we are.

It seems the seller's proceeds got invested in a partnership. Not the original property that was owned. SO, he exchanged a property for a partnership share?

Then the partnership used the funds to acquire property.

[Terry53029]

From IRS instructions for form 8824.  

"Special rules apply to like-kind exchanges made with related parties, either directly or indirectly. A related party includes your spouse, child, grandchild, parent, grandparent, brother, sister, or a related corporation, S corporation, partnership, trust, estate, or tax-exempt organization. See section 1031(f).".

You have a complex question which you need to research your self, and not rely on a blog to give you a simple yes or no

[Terry53029]

From IRS instructions for form 8824.  

"Special rules apply to like-kind exchanges made with related parties, either directly or indirectly. A related party includes your spouse, child, grandchild, parent, grandparent, brother, sister, or a related corporation, S corporation, partnership, trust, estate, or tax-exempt organization. See section 1031(f).".

You have a complex question which you need to research your self, and not rely on a blog to give you a simple yes or no.

[sjrcpa]

Is the new investor putting up money?

In proportion to his ownership %?

[PATAX]

Also research the State tax laws/codes to see if it conforms to the Federal rules/codes.                                                                                                                                                                                                           >>> Please reinstate Ironman, Thank You. <<<

[mike9]

Hi All:

Thanks so much for all your kind responses to this question. Situation was resolved as follows so the 1031 will qualify

SMLLC owner decided not to bring in a new partner. since he had already recorded the new property under his SMLLC along with a Mortgage

It was too much work to undo this and create a new LLC etc.

was if If he had recorded 50% of the new property ,and loan under a new LLC.