1031 property in personal name into a STR in LLC

[Mike O.]

My wife and I own a rental in Minnesota that we are wanting to sell and do a 1031 exchange into a STR in Florida. The problem is the Townhome is in both of our names and the LLC is only in my name. Will we need to jump through hoops for this work? What is the best way to handle this situation? We currently have a STR in Pigeon Forge. Thanks

[Dave Foster]

@Mike O., You won't have problems with that as long as the LLC is a "disregarded entity" (meaning you are the only member and it has elected to be taxed as a sole proprietor so it does not file it's own tax return). This means that all the activity of the property is reported on you and your wife's joint tax return anyway. So you, you and your wife, and your llc are all the same tax payer according to the IRS.

In that event you can sell as you and your wife and buy as your single member LLC. As a matter of fact this is the only way you can do it with the 1031. Since MN is not a community property state. So the IRS has declared that husband/wife LLCs in non-community property states cannot be disregarded entities. So you need to sell as you and your wife. And complete the 1031 as your LLC or as your LLC and your wife's disregarded LLC (if you want to go that route).