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MIAMILAW1127
MIAMILAW1127, Lawyer
Category: Real Estate Law
Satisfied Customers: 755
Experience:  Founding Partner at Moises Law, P.A.
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We have two companies. One with 6 Members and the other with

Customer Question

We have two companies. One with 6 Members and the other with 4 Members. They are LLC's in MN. I am wondering if we can take advantage of the 1031's when we sell the property? I think we need to add Tenants in Common to do this. Can this be done?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  MIAMILAW1127 replied 1 year ago.

Hello. I am going to be assisting you with your question today.

Please note: This is general information and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms.

Please help me understand a little better. Do both LLCs own separate properties? Are you selling both? Is the 6 member LLC the owner of one property & the 4 member the owner of the other?

Customer: replied 1 year ago.
Separate properties. Sell parts of both
Expert:  MIAMILAW1127 replied 1 year ago.

Each company would be able to do a 1031 on its own for the properties it is selling.

Are you asking if you need to add tenants to the property and have it rented to take advantage of the 1031 exchange?

Customer: replied 1 year ago.
Can the individual member take advantage. Like I am a member of both and I would like to use the 1031.
Expert:  MIAMILAW1127 replied 1 year ago.

No, an LLC member interest, where the LLC elects to be treated as a partnership, or a partnership interest are considered personal property and cannot be exchanged. IRC Section 1031(a)(2)(D) specifically prohibits the exchange of partnership interests. However, both an LLC or partnership (or any other entity for that matter) can do a 1031 exchange on the entity level, meaning the entire partnership relinquishes a property and the entire partnerships stays intact and purchases a replacement property.

Customer: replied 1 year ago.
I understand that the LCC can sell and then buy other property. But we are wondering if we can change something in the LCC to allow the individual to take advantage? I well check your answer tomorrow.
Expert:  MIAMILAW1127 replied 1 year ago.

No. The individual member cannot take advantage of the 1031 exchange that the LLC would have. Only the LLC can do so.

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