Capital Gains Question.

[Gerald Marshall]

We are selling a property that still in my wife's former married name, and looking to turn around and reinvest it in a new piece of property under an LLC. Is there a way to get around the "same name" rule of the 1031 Exchange?

[Dave Foster]

@Gerald Marshall, The rule for a successful 1031 is that the tax payer for the old property must be the same tax payer as for the new property.  So there's a couple of things to consider that may be to your advantage.

1. If you and your wife file a joint married return then both of you are really the tax payer already for that property regardless of whose name is on deed.  The activity for that property is being reported on your schedule E so that tax return is the property.  So you and your wife are actually selling and buying in the 1031.

2. If you are simply setting up a single entity LLC with no intent to be taxed as a partnership or to file a tax return as the LLC then the LLC itself is a "disregarded entity". Once again all activity of the property owned by the LLC is reported on your schedule E so once again you and your wife are really the tax payer regardless of the fact that it is deeded in the name of the LLC>

The opportunity with this is that if the property is owned by such and LLC you could sell the property as your wife owns it right now (old married name) and do an exchange as husband and wife (the real current tax payer) and purchase the new property either in your names or in the name of the disregarded LLC.

You've got a lot of flexibility at this point.