The IRS taxes home sale profits based on ownership, not who receives the money.

When it comes to your 1031 exchange the LLC really isn't the issue.The IRS cares about which tax return reports the activity of the property.

Can IRS still see it as a part of primary dwelling unit and thus, consider it not eligible towards achieving REP status?

All that while state and IRS taxes on profits are increasingly challenging, as refinanced funds for construction in progress aren't deductible expenses, thus not lowering tax bills.All that said, the "snowball quickly" effect you mentioned isn't quite happening yet.

I’m having trouble determining the correct monthly rental rate for my property.

The IRS defines eligibility by the occupancy of the property, how the mortgage is being used, and of course, the amount of the debt being paid.

This requires careful structuring and compliance with IRS rules.Installment Sales or Buyouts – Instead of distributing properties outright, investors can sell or buy out their respective shares over time, spreading out tax liability and reducing immediate capital gains impact.LLC Restructuring (State-Specific) – Converting the corporation into an LLC taxed as a partnership may allow for a more tax-efficient asset distribution.

True, converting a personal Schedule E to a partnership will indeed reduce your IRS audit chances, statistically speaking.

FYI, a Cost Segregation Study will "not" increase your chances of an IRS audit.

The IRS sees that as taxable income, even if you never physically touched the money.Now, the good news is you might be able to offset it as a business expense.