Discussion:1031 EXCHANGE with LLC
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Discussion Forum Index --> Advanced Tax Questions --> 1031 EXCHANGE with LLC
Discussion Forum Index --> Tax Questions --> 1031 EXCHANGE with LLC
| 20 February 2008 | |
| My client, S Corp. just sold real estate property and exchange to new property. My client's attorney suggests them to form a new single member LLC with S corp. inside of LLC as single member. Is this a good suggestion for 1031 exchange? | |
| February 21, 2008 | |
| I am unclear about the structure suggested by your client's attorney. If he is suggesting that the S corp. form a new LLC and become the sole member of the LLC and have the LLC acquire the replacement property, then I could see some advantages. The LLC would be disregarded and it would be as if the S corporation directly owned the replacement property which is a requirement of the exchange. Whether the advantages (primarily the liability shield) would outweigh the disadvantages (extra accounting, annual fees, possible state tax ramifications, etc.) is something you and your client would have to decide.
It does nothing to solve the age old real estate within a S corporation problem. | |
| 25 February 2008 | |
| Thanks, Jim. The qualified Intermediary will form a SMLLC and starting doing improvement on a law land. Within 180 days, the assign back to my client, the S corp. as SMLLC to qualify 1031 exchange. When this SMLLC first created, which EIN should be used? Does Forkm 8832 need to be filed? | |
| 25 February 2008 | |
| Are you saying that because it is an SMLLC that this will qualify?
- doesn't it depend also on the structure of the SMLLC - in other words, a QI who is an individual could have an SMLLC taxed as disregarded (and report on E/C/F, etc) but an S corp with an SMLLC the disregarded SMLLC is taxed as an S corp. | |
| May 16, 2008 | |
| Kevin, sorry it has taken so long to get back to this discussion. I believe that the activity of a SMLLC owned by an S Corporation is reported on the income tax return of the S Corporation owner; not on a separate S Corporation return. Further, if the replacement property is owned by the SMLLC and all other requirements of sec. 1031 are met then yes the transaction will qualify for deferral.
As to the question of an EIN for the SMLLC: I would suggest the QI get a separate EIN for the SMLLC for banking purposes. If no bank account was being opened then I see no need for the SMLLC to use any EIN. | |
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