1031 on an LLC and transferring to own name

[Jerry Daily]

I currently own a property in an LLC and a separate rental in my own name. I am planning on selling the property i own with my LLC and doing a 1031 to purchase another property. However, I was wondering if when I buy the next property I can just do it in my own name and get rid of the LLC. I am the only member on the LLC, I am married but I would buy this next property only under my name if it avoids complicating anything.

Here are some of the reasons for this: i had an insurance claim with my LLC about 5 years ago and now my insurance is through the roof, interest rates are slightly higher i use the LLC because I will be getting a mortgage. I am also thinking there may be tax advantages because both of the properties I currently own and rent make a considerable amount of money that after all deduction, depreciation etc. I still pay a fair share of taxes. This next house will have a large mortgage and will definitely show as a loss on paper. I am wondering if some of those losses can offset the gains of my current property.

Current Situation:

One house owned by self: 600,000 (has small mortgage)

House owned by LLC: 350,000 (does not have mortgage)

New purchase made by self using 1031 exchange from LLC: 600,000 (mortgage around 300K)

[Bill B.]

If the LLC is "disregarded" then you can buy the new property in your name, maybe/probably. All the IRScares is the taxpayer stays the same. So make sure the LLC doesn't file it's own taxes

If you sell $600k and $350k properties to buy one property that new property will have to be $950k or more. Or you will be taxed on every dollar you spend less than that. The amount you have to buy has nothing to do with what you paid or how big a mortgage you have. You simply add up the “net sale price” (after removing selling COSTS, the mortgage isn’t a cost.) that how much you have to buy to avoid paying any taxes. You must also reinvest all “cash” from the sales.  

IE: if your small mortgage on your property owned in your name was $100k. You'd have to buy $950k minus let's say $50k in selling costs, so $900k. And you'd have to invest the $500k "cash" from your property and the $350k from the LLC. So you'd have to put down $850k and buy $900k to avoid any taxes.

If you don’t have a QI yet. (You must have before you close on your sales.). Reach out to @Dave Foster. He did a great job on mine and can answer any technical questions you might have. 

[Jerry Daily]

Thanks Bill, I file the taxes all together. I don't have a QI, I will reach out to Dave. 

I am not selling the house I have that is 600K, just the one the LLC owns that is 300K. But i do appreciate that scenario and information.

[Dave Foster]

@Jerry Daily, We just connected via pm.  But for the good of all the forum readers - what @Bill B. is talking about is an LLC that doesn't file its own tax return. You're the only member and the activity of the property is reported on your personal tax return. In that case, you can sell as the LLC and buy as yourself (or as you and your wife if you file a joint tax return). This can be a huge help when it comes to getting financing for the new property.