1031 Property into Commercial (NC)

[Emily Happick]

Hello everyone! I have a triplex that we STR and would like to sell it. Ideally, we would 1031 exchange it into a multifamily BRRRR opportunity (5+ units = commercial loan). The triplex is currently in our personal names. I've looked, but am not really finding answers - do we need to transfer this to our LLC in order to exchange it for a property that will have a commercial loan on it? TYIA!

[Chris T.]

@Emily Happick - I'll start off by saying that I am not a lawyer or CPA.  

That said, we did exactly what you are asking about. My wife and I sold a SFR that was in our names and did a 1031 into a commercial property in our LLC's name. This is how it was explained to me by our CPA. Since the the LLC is owned only by my wife and I and the previous property was only owned by my wife and I, at a federal tax level, there is no difference in how it would be reported on our taxes since we file jointly. Basically the IRS doesn't even see that the property is in an LLC since it would be reported exactly the same way on our personal taxes.

This all changes if you own or plan to own one of the properties with someone other than your spouse.

Again, I suggest you speak with your CPA and your 1031 Qualifies Intermediary to get the professionals guidance since they are the one that will be handling your tax paperwork.