1031 Exchange from Residential to Commerical

[Nick R.]

Curious about a particular 1031 caveat as it applies to me... I sold a single family rental with loan and title in my personal name. I put my gains into a 1031 exchange account. Now I want to purchase a multifamily property (5+ units) with a commerical loan. 1031 exchange law requires that exchanged properties must be held by the “same taxpayer”. Meaning that the multifamily must go into my personal name. If I quitclaim the property to the LLC after closing escrow on a commercial loan, I have heard such action could trigger a “due on sale” clause whereby my total loan amount could become due and/or I could be required to pay a prepayment penalty. Without the LLC, my tax structure is less favorable and I am exposed to personal liability. Any guidance on this situation?

[Joel Owens]

You need to check with your 1031 company that did the exchange. When you said (put your gains) you did not get a check or touch the money at any point right and then put in an account?

You are supposed to get the 1031 exchange company in place before you close on the sale of your property and not touch the money.

No legal advice given.