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Current have general partnership in California. Looking to…

Customer Question
Current have general partnership...

Current have general partnership in California. Looking to convert to llc. We are in process of selling business and completing 1031 exchange in the next 3 months. Will this effect the 1031. The new business will have same partners and percentages, but want new asset to be taken on under llc for liability purposes.

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

Not that I'm aware of

Submitted: 1 year ago.Category: Finance
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Answered in 1 minute by:
3/21/2017
Financial Professional: Lev, Tax Preparer replied 1 year ago
Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 33,311
Experience: Personal Investment, Tax Preparation
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For income tax purposes - there will NOT be any difference - and you will continue to report as a partnership.
If you depreciated assets - the same depreciation schedule will continue.

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Customer reply replied 1 year ago
Will it effect the 1031?
Financial Professional: Lev, Tax Preparer replied 1 year ago

Absolutely not.

But you will need to determine the basis for the replacement property.

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Customer reply replied 1 year ago
Should I complete the conversion first or after the exchange. I was thinking the new lender will need to know. Or is it easier afterwards
Financial Professional: Lev, Tax Preparer replied 1 year ago

From tax prospective - that makes no difference.

As long as you are using the same name and same EIN for the partnership - that will be OK.

If however you plan to change any tax identification - it might be more clear to complete transaction before conversion to the LLC.

Then - you will just inform the lender about re-organization.

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Customer reply replied 1 year ago
changing the name is ***** ***** long the ein is the same
Financial Professional: Lev, Tax Preparer replied 1 year ago

You may change both - that is not an issue.

But then you will need to provide a lender a new tax ID and make sure all required reporting are correct.
Just extra overhead.

But that doesn't affect 1031 qualification.

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Customer reply replied 1 year ago
if I keep the same name and ein it's better and switch the entity type. What is the IRS looking at during the 1031 to keep the same tracking, or etc
Financial Professional: Lev, Tax Preparer replied 1 year ago

That reorganization will NOT affect section 1031 transaction.

There is no disposition of the property and nothing that might trigger any tax liability.

If audited - the auditor will look that all 1031 requirements are met and you correctly determined a basis for the replacement property.

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