Putting a 1031 exchange property into an LLC (3 years later)

[Ria Lamb]

Three years ago, my husband and I did a 1031 tax exchange for a rental property. The property is still a rental property and will continue to be, at least for the forseeable future, but I would like to put the property into an LLC for more liability protections. My attorney referred me to my CPA, my CPA referred me to the attorney for the answer to my question: Can I now, after three years, put the property into an LLC? Are there any tax ramifications?

Second question... if we can put in LLC, the house is currently titled in both my husband and my names but we were thinking of having him sign it over to me and having the LLC in my name only. Possible or no?

[Bill Exeter]

Hi @Franky Juwana, 

It is only a problem if you set-up one LLC with two members thus making it a partnership for tax purposes. However, if you currently hold title as individuals and then you each set-up your own single member limited liability company (SMLLC) and disregarded entity with each of you being the single member of one of those entities to acquire your new replacement properties, you could each acquire an undivided interest as tenants-in-common using your new SMLLC/Disregarded entity on day one. As long as the SMLLC is disregarded for tax purposes, the new replacement property would be treated as if each of you acquire the undivided interest in the property directly as individuals.