1031 Exchange to a home to live in?

[Karla Merry]

I am a member-manager of an LLC which owns a property that I would like to 1031 exchange into another property and then move into. Can I do that? And, what is the best way to make that happen? Could I rent from the LLC?

[Dave Foster]

@Karla Merry, If that is a multi member LLC and you don't own more than 50% of it then it might be allowable. Your accountant will have an opinion for sure. But it would have to be an arms length rent with you as an unrelated party. The LLC is actually going to be the taxpayer and exchanger. lease, collect and report the rent. But it isn't cut and dried. Like @Kenton LeVay said, it's shades of Ehhhh from an optics point of view.

If you can be patient and put that property into service for a year or two then it would be absolutely fine for you to change the use of the property and move in whether or not the LLC was a related party or a disregarded entity to you. Converting a property from investment to primary use does not trigger a tax. So there is an easy way - if you've got a little runway.