LLC related party exchanges

Discussion in 'Tax' started by daojoneser, Jan 28, 2006.

  1. daojoneser

    daojoneser Guest

    I am a 50% member in an LLC with my business partener Chris.
    We have just sold a building and are intending to enter
    into a 1031 exchange. One of the properties we have
    identified is Chris' mothers residential investment
    property. She has lived in the home for 2 out of the last
    five years. If we purchase the property and she "cashes
    out" so to speak, do we disqualify the exchange as part of
    the related pary exception in the IRC 1031? Can we get
    around this problem by decreasing Chris membership in the
    LLC to less than 50%? Thanks for your help on this matter,
    I'm sweating bullets.
     
    Last edited by a moderator: Jan 23, 2018
    daojoneser, Jan 28, 2006
    #1
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  2. daojoneser

    L K Williams Guest

    You say you "have just sold a building . . ." If you are
    using the past tense correctly, it is too late to do a 1031
    exchange. In order to make such an exchange, you have to
    comply with ALL the requirements, including the requirement
    that the transaction be structured as an exchange from the
    beginning. Also, you must have an intermediary engaged to
    receive the proceeds from the sale.

    As such, the related parties rules are irrelevant.

    Lanny K. Williams, CPA
    Nawarat, Williams & Co., Ltd.
    Income Tax Services for Expatriate Americans
     
    Last edited by a moderator: Jan 23, 2018
    L K Williams, Jan 29, 2006
    #2
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  3. daojoneser

    daojoneser Guest

    Sorry I did relay the information correctly. We ARE in 1031
    exchange already. We have identified three properties, one
    of which is the property of Chris' mother. My 1031 exchange
    company holds the funds and will release when we close.
    However Chris' mother is going to cash out since the
    property served as her primary residence for 2 of the last 5
    years. We would be using the property as a cash flow
    producing investment.
     
    Last edited by a moderator: Jan 23, 2018
    daojoneser, Jan 30, 2006
    #3
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