1031 Exchange & Borrowing from LLC

[Nate Wengerd]

I WILL be talking to a CPA about this but I would like to have an idea of what I’m looking for before going into the conversation. Now that we got that out of the way, In a couple weeks, my business partner and I are scheduled to close on our first flip that took over a year to complete in Ohio. To fund this deal, we borrowed $30,000 from a friend at 9% interest. This loan went into my partner’s LLC that he has for his construction company. We have roughly $30,000 in rehab costs that was paid for out of the construction company as well. Purchase price for the house was $24,000. Now that we’re about to close, the loan needs to be paid back to the lender and the rehab money needs to be replaced into the company. We’re selling the house for $119,500 and want to 1031 the profits (roughly $40,000) into our next deal. What are the tax ramifications for using money from the deal to pay back your own LLC and a private lender while doing a 1031 exchange on the rest of the profits and is this even possible? Thank you for reading this and I look forward to your responses.