1031 single tax-payer question

[Steve Shaffer]

Hello fellow nerds! I'm trading up into a 15-unit and selling a single family and a 4-plex to help fund the purchase. I'm using a 1031 and all three properties are held in different entities with separate EIN's. I am 100% owner on everything and am using the single tax payer exclusion to pull of the 1031.

My question is how soon/what is the mechanism for selling equity in the 15-unit after I close. I have taken in private money in the past as debt, but have never sold equity. The plan is to sell 30% of the LLC that will own the 15-unit to a fellow investor, but I'm concerned about this somehow poisoning the single taxpayer exclusion thing. Anyone know anything about it? If there's an interval I need to wait etc? Thanks in advance!

[Dave Foster]

@Steve Shaffer, There is no time limit before you can sell equity after a 1031 exchange.  But there is also no time limit when paying tax on the gain expires.  Whenever you sell you will incur tax on the gain from the sale.  

One thing you may consider instead is leaving the property in it's entity and selling membership interests in the LLC owning the property. You'll need to change it's filing status to partnership or s corp but you can sell the membership if you contribute cash for membership interest which gives the buyer a capital account for contribution. You'll need your accountant to guide you through.