All Forum Posts by: Jackie Riley

Thanks both. Putting into LLC is recommended by attorney and for liability protection purposes. The property is commercial and most people tend to put into LLC. No I am not making decisions for my parents.

Hello –

I'm looking for confirmation of understanding/ advice relating to transferring property into LLC and treatment from a tax perspective

My parents completed a 1031 exchange over 2 years in their own names – they file a joint tax return. We'd like to transfer their interests to an LLC – however, we do not wish to be treated as a partnership for federal tax purposes. It seems that if my parents transfer the property to a LLC in which each owns a 50% interest, the default federal tax classification would be a partnership if we do not live in a community property state and the property is not located in a community property state? We live, and the property is located, in NJ, which based on my research is not a community property state. Would appreciate some advice on this. Our CPA told us if we transferred to NJ LLC with both of my parents as 50/50 owners, they can treat the LLC as a single member for federal tax purposes and continue to file on Schedule E because they file a joint return, but this seems to be inconsistent with what I've read.

If we want to transfer to an LLC and continue reporting on Schedule E on their joint tax return, can I simply set up the LLC with one of my parents as the member and have each parent deed their interest to the LLC that will be owned by one parent? I think there is a deemed sale from one parent to another but since they are husband and wife filing joint return, I don't think there are tax ramifications but would appreciate thoughts/ advice here. We'd prefer to not deed their interests to 2 separate SMLLCs as this creates complexities with having to maintain multiple bank accounts, etc.

Note that at some point in the future we'd like to complete a 1031 but in the name of LLC instead of their names.

Thanks in advance for advice/ input.  I've also posted in QI/ 1031 Exchange Forum as well.

Jackie

Hello –

I have read the posts in this chain and looking for confirmation of understanding/ advice.

My parents completed a 1031 exchange over 2 years in their own names – they file a joint tax return. We'd like to transfer their interests to an LLC – however, we do not with to be treated as a partnership for federal tax purposes. From the posts, it seems that if my parents transfer the property to a LLC in which each owns a 50% interest, the default federal tax classification would be a partnership if we do not live in a community property state and the property is not located in a community property state? We live, and the property is located, in NJ, which based on my research is not a community property state. Would appreciate some advice on this. Our CPA told us if we transferred to NJ LLC with both of my parents as 50/50 owners, they can treat the LLC as a single member for federal tax purposes and continue to file on Schedule E because they file a joint return, but this seems to be inconsistent with what I've read in this chain.

If we want to transfer to an LLC and continue reporting on Schedule E on their joint tax return, can I simply set up the LLC with one of my parents as the member and have each parent deed their interest to the LLC that will be owned by one parent? I think there is a deemed sale from one parent to another but since they are husband and wife filing joint return, I don't think there are tax ramifications but would appreciate thoughts/ advice here. We'd prefer to not deed their interests to 2 separate SMLLCs as this creates complexities with having to maintain multiple bank accounts, etc.

Note that at some point in the future we'd like to complete a 1031 but in the name of LLC instead of their names.

Thanks in advance for advice/ input.

Jackie

Hi - 

We did a 1031 exchange in 2021 and I am looking for an accountant in NJ who can assist in preparing our 2021 tax return and who has experience in preparing Form 8824.   The return is on extension until October 15.  I have all the documentation.   Appreciate your recommendations. 

Also, just for my knowledge, couple of questions for the group:  on the federal return - are any other forms required other than the 8824 to report the 1031 transaction and is any similar form required in NJ?

Thanks,

Jackie