1031 Exchange Purchase via an LLC, 2 LLCs or Personal Names

[Karl Kauper]

Hi All -- Wondering if anyone out there has faced a similar situation and, if so, whether you might have any guidance or opinions, etc.? My wife and I are in the process of doing a 1031 exchange purchase. We are in contract to sell a 2-family in Brooklyn that is held in both of our personal names, and we are purchasing a 12-unit MF in Ohio. We have spoken with several 1031 exchange experts (QI's, attorneys, a CPA) and have been told that, to comply with 1031 exchange rules, we must buy the 12-unit in one of three ways: (1) simply buy it in our personal names, (2) buy it via two separate LLCs (one owned by my wife and the other owned by me), or (3) initially buy the property in our personal names and then subsequently transfer the property to a 2-member LLC (owned by the two of us). We cannot (at least initially) buy the property via a single 2-member LLC because the IRS would view the 2-member LLC as a different tax payer than my wife and I (as owners of the property we are selling). I find it a little strange that the IRS would not view a 2-member LLC as the same tax payer but would view two single-member LLCs as the same taxpayer, but this is what we have been told consistently by all of the experts we have consulted. So, we are leaning towards buying the property via two LLCs, although I'm a little concerned that this will make things (like obtaining loans) more complicated for us in the future. I would appreciate hearing any opinions -- what would you do and why? Thanks!! -- Karl