All Forum Posts by: Amelia Gull

Thanks for these details! It was just the clarification that I was looking for.

Any tips, thoughts, or things to be careful with on doing a quick build via an “Improvement Exchange”? I want to take a look at that option again, although it seems complex. I would likely be able to close on construction financing immediately upon the first home close, and likely have permits ready to go as well. 

Quote from @Sean Ross:

@Amelia Gull, you're situation intersects with a couple different 1031 rules.  

(1) It sounds like your LLC is a separate tax filer, but the issue you may run into is that the IRS makes it tricky to buy from "related persons" under IRC 267(b) (a category that includes business entities) in a 1031 exchange. Are there any other members in the LLC besides you and your husband?

(2) While it's usually recommended to own a property and treat it as an investment for at least 24 months before doing a 1031 exchange, this isn't a hard and fast rule.  Most accountants will be comfortable with an exchange on a property that you've owned 1 year and change.  We see exchanges that look like this frequently. 

My guess from reading the information you've given is that your LLC is going to be considered a related party in a 1031.  

Thank you for these responses!

Yes - my husband and I are the only members of the LLC, so it’s likely we will be considered “related persons”.

As a side note, by the time we intend to list the home, it will have been rented for 24+ months. 

So it sounds like I likely have 2 options:
1) just sell the property and eat the Cap Gains tax and move on, or
2) do the entire exchange under our personal names and do a “improvement exchange” and book it through the home build. (We have been completing these specs in less than 5 months, so it could be possible, but stressful!)

Hello,

I'm new to this community, and value the knowledge base here! My husband and I own 2 rental properties (1 has been rented for 10+ years, and the other for 1+ year). The newer property just isn't cash-flowing the way we'd like it to be, so I'm looking into the viability of a 1031. The properties are owned under our personal names. 

My husband is also a builder, and he is building a series of spec homes that have more bedrooms and would rent for more (fixing the cash-flow problem). If we built one of these spec homes (owned as our company), and then did a 1031 exchange under our personal names, is that viable because the parties are two separate tax entities? We are an LLC, taxed as S-corp, with K-1s. We asked our current CPA, and he's not completely sure since it's a pass-through tax situation. Tried calling the local CPA's that are "experts" at 1031s, but they aren't responding because it's busy tax season...I'll dig in deeper with tax people if it's a possibility, but wanted to throw it out there to this community first.

Any insights are much appreciated!