Accepted Answer

Hello XXXXXXXXXXXXX,

First, from a paperwork standpoint, it would be simpler for you if the LLC was in only in your mother's name. The reason is that with single member LLC's, the LLC itself does not file a tax return. All of the income from the rental property owned by the LLC is simply reported on the personal income tax return which is filed by the single member.

If the LLC has two or more members, then it is treated as a partnership. In that case, the partnership itself must file a tax return and then each partner must also file a personal tax return to report their share of the profits.

As far as the property you purchased a year ago and now wish to sell, you could transfer this in to an LLC, but you would have to be listed as one of the LLC members to do this. Transferring the property in to an LLC offers no tax advantages. Any gain you have from the sale would still be taxed the same.

As far as purchasing another property and deferring the taxes, that is what is known as a 1031 exchange. However, it is not just as simple as completing the sale and then using the money on your own to purchase another property. With a 1031 exchange, the entire exchange must be handled through an intermediary. You must use the money from the sale of the first property to purchase another "like kind" property. In other words, you could not sell a retail shop and then use the money to buy an apartment building. You could sell one rental property and use the money to purchase another rental property. The money would never touch your hands. It would be handled by the intermediary.

The replacement property which you would be purchasing needs to be identified within 45 days of the first sale being completed, and the transaction of purchasing the second property must be completed within 180 days. Here is a link to a website which explains more of the rules on how to participate in a 1031 exchange.

http://www.1031exchangemadesimple.com/

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you XXXXXXXXXXXXX.

Expert:	Merlo
Pos. Feedback:	99.9 %
Accepts:	7559
Answered:	7/29/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad