1031 EXCHANGE REPORTING HELP

[KATHERINE]

Hi dear friends, The old LLC (the XX  GROUP LLC) holds multiple units.  they sold two units in 2022 and replace it (1031) with IL property.  The the IL property is under a new LLC (YY home LLC) and new LLC is a multiple member LLC.  The EIN letter suggested to file 1065.   The replacement property is recorded new LLC as owner on all documents.    Both old and new LLC  have two same  equal members (brothers 50% and 50%).    This is the second exchange they did.   the first one was in 2021, this is the second (2022) .    the first one(completed in 2021): the previous account report the its new replacement property under ZZ LLC (the new one set for hold the replacement) and ZZ LLC filed its own 1065 in 2021.    Now, My question is: should I report the new property under old LLC (XX GROUP)  and treat the new (YY HOME LLC ) as disregarded entity ;   Or follow the old accountant on how he did with the prior exchange, and report all activities under new LLC (YY home LLC).  Please advice.   Thank you!

[Lion EA]

I haven't had to report a 1031 exchange, only academic experience. But I thought one requirement for a 1031 exchange is that the replacement property needs to be titled the same as the exchanged property. Is that incorrect, or is there an exception if the LLC members are the same in both the replacement LLC and the exchange LLC?

I would probably grab an NATP self-study course to guide me through the tax return reporting. Hopefully, preparers with practical exchange experience reply to your post. 

[KATHERINE]

1 minute ago, Lion EA said:

I haven't had to report a 1031 exchange, only academic experience. But I thought one requirement for a 1031 exchange is that the replacement property needs to be titled the same as the exchanged property. Is that incorrect, or is there an exception if the LLC members are the same in both the replacement LLC and the exchange LLC?

I would probably grab an NATP self-study course to guide me through the tax return reporting. Hopefully, preparers with practical exchange experience reply to your post. 

Thank you, Lion.  yes, hope someone can give some advice.  Normally, I did exchange in 1040, which is only matter of a calculation.  (software will calculate, but I will verify).   Now, I saw both reporting ways are existing if the it is multiple member LLC.  I preferred the old accountant's way because the balance sheet and depreciation schedule will be clean.  also, if they do exchange again later on exchanged property, a separated reporting will be more clean in future.  otherwise, the depreciation and balance sheet will so messy.  

[Lee B]

"How Do I Change Ownership of Replacement Property After a 1031 Exchange?

If that is your intention, it would be wise not to act straightaway. It’s generally advisable to hold onto the replacement property for several years before changing ownership. If you get rid of it quickly, the IRS may assume that you didn’t acquire it with the intention of holding."

Frankly, the way these exchanges were handled raises some serious questions !

[KATHERINE]

39 minutes ago, cbslee said:

"How Do I Change Ownership of Replacement Property After a 1031 Exchange?

If that is your intention, it would be wise not to act straightaway. It’s generally advisable to hold onto the replacement property for several years before changing ownership. If you get rid of it quickly, the IRS may assume that you didn’t acquire it with the intention of holding."

Frankly, the way these exchanges were handled raises some serious questions !

Thank you, Cbslee!   The issue in this case is not usage.  They will hold replacement as investment.   My issue is: where to report the rental activities from the replacement property (new property).   In the old LLC , or the new LLC.  (both LLC has same individuals as owners).    Since all documents regarding the replacements property is under the new LLC name. and New LLC was formed as multi-member LLC (same individuals as old LLC).   I saw IRS allows partnership to do 1031.  Thank you!

 

[Lee B]

The IRS regards the changing of ownership to be a potential "red flag" issue!