USA Question on 1031 exchanges


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Hello. I have a question on 1031 exchanges:

A C-filing LLC owns a residential rental property. This property was owned by an individual, who created the LLC in 2015, then gave the deed to the corporation. If the property was originally acquired by the individual in 2009 for $150k and later given to the corporation in 2015, when was the property acquired for purposes of a 1031 exchange?

To clarify, the corporation intends to purchase an investment property to avoid capital gains taxes. The current property can sell for around $250k. The LLC has filed 1120 since it was created, with around $3200 depreciation yearly.

Are there other alternatives to avoid capital gains tax, if the owner decides not to reinvest?

Thanks in advance!
 
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Werner Reisacher

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I assume that the LLC became the owner of the legal title sometime in 2015. The price at which the property was transferred into the LLC and the date of that transfer count as the purchase price and date of the new ownership of the property.
With regard to the depreciation, you have to be careful about the possibility that you have to recapture the depreciation. It depends on the categories into which the two properties involved fall. You do need to get professional advice from the advisor with whom you are carrying out the 1031 exchange.
 

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