1031 exchange - Contributing property to multi member llc

[Jonathan Jacobsen]

What are the rules for contributing a property into an LLC after the transaction is complete?

I have a rental property that I will be selling that is owned personally. I will be exchanging this for another property that will be purchased personally. Can I then contribute the property into an LLC with other partners or do I need to hold the property in my personal name for a seasoning period? 

The other member of this LLC owns the other portion of the property personally and we would like to both contribute our properties into one llc for liability purposes but I do not want to run afoul of 1031 rules.

[Dave Foster]

@Jonathan Jacobsen, There's nothing inherently wrong from the 1031 side of things.  And contributions into and out of LLCs in return for membership interest are not generally a problem either.  There are some accountants who would like to see a tax filing in the old name before doing that.  But it's up to your individual accountant's preference.  It sounds like you have a sound business reason to combine those pieces of property.  I would imagine your accountant will agree.

Just understand that as soon as you contribute the property into the new LLC it will become the taxpayer for the property. So any future 1031s will require that the LLC (and all members) go forward together. Just a thought, but you may want to consider forming a multimember LLC (with the same membership as all of the LLCs that own the property) that will not own the property. But will manage the property for the LLCs that actually own the property. You can pass along all liability and expense that way without actually transferring the property.