1031 exchange, personal/rental to llc, and ways to extend4 deal?

[Matt Berklacy]

Acquired property in Raleigh NC Briercreek, 150k, few years rental, paid off cash; titled personal name, 

Selling 225k, want to buy a property elsewhere cash, look for deal, auction, and pay it in same cash, and live part time in it, and airbnb it also as rental.

will this fly as 1031 exchange, (like buy new as LLC, single member, single member live part time in property, airbnb it)

and are there legal loopholes to extend 45 day deadline for a new deal.

[Lynne Bagby]

HI Matt! 

You have quite a few variables here.

1 Tax ownership must stay the same from the sale of the relinquished property through the purchase of the replacement property. IF you have been reporting income and expenses under your SSN for the NC property, upon purchase of a replacement property in a 1031 exchange, you are able to purchase in an SMLLC, taking the "indivicual" tax election (not the corporate), b/c you would continue to use your SSN to report income and expenses as before. This would make the SMLLC "disregarded" for tax purposes

2. IF you sell for $225,000,  your replacement property should be "equal or greater in value" than the relinquished property you sold (net the "allowable" costs of sale); ALL remaining cash (which would go to the QI at the close of the sale) is used to purchase the replacement property. Any shortage would be made up by bringing in your own personal cash or mortgage money.

3. The property you purchase must be used for "productive use in a trade or business or held for investment". IF you choose to use this property for "short term" or "seasonal rentals" AND wish to have some personal use time, please refer to IRS Revenue Procedure 2008:16 and discuss it thoroughly with your CPA.

4. There are NO extensions to the "180-day" exchange timeline which includes the "45-day" identification period in a 1031 exchange. (The only exception would be in a federally declared disaster when the IRS issues a memo which specifically mentions extensions to the exchange timelines and issues its instructions). 

Please discuss your plans with your CPA/tax advisor.