[WSBAPT] Q re 1031

Mon Feb 8 12:38:09 PST 2016

It is. I'm not concerned about that requirement. The crux of my issue is
that I am uneasy telling him that it is okay to do something right after
closing that he could not have done at closing. Because of the "same
taxpayer" rule, he can't purchase the replacement property through a
multi-member LLC. He would have to purchase it individually or his living
trust or a single-member LLC. If he couldn't have purchased it through a
multi-member LLC at closing, I am uneasy telling him that it is okay to do
it right after closing (i.e., transfer all the interests into the
multi-member LLC right after closing).

On Mon, Feb 8, 2016 at 12:20 PM, John J. Sullivan <sullaw at comcast.net>
wrote:

> Its still being held for investment inside the LLC, not?
>
> John Sullivan
>
> Sent from my iPhone
>
> On Feb 8, 2016, at 9:00 AM, Mark Higgins <markthiggins at gmail.com> wrote:
>
> There is a requirement that the replacement property be "held for
> investment."  You might do some research on this in a situation where the
> taxpayer already intends to transfer the property at the time he receives
> it.
>
> Mark
>
> On Mon, Feb 8, 2016 at 6:16 AM, Jennifer Sohn <jennifer at sohn-law.com>
> wrote:
>
>> I see, thanks for the clarification.
>>
>> Sent from my iPhone
>>
>> On Feb 7, 2016, at 11:25 PM, John J. Sullivan <sullaw at comcast.net> wrote:
>>
>> I don't see the basis or incentive for trying to impose the step
>> transaction doctrine or the new substantiality doctrine as long as the
>> deferred 1031 transaction is "old and cold" when the 721 transaction is
>> carried out. It just has to be the same person receiving the replacement
>> property. What he does with it next is an independent transaction.
>>
>> John Sullivan
>>
>> Sent from my iPhone
>>
>> On Feb 7, 2016, at 10:07 PM, Jennifer Sohn <jennifer at sohn-law.com> wrote:
>>
>> Thanks. So, under 1031, even though my client could not have purchased
>> through a family LLC, it is still okay to put his interest into a family
>> LLC soon after closing? I just wanted to make sure that I avoid any step
>> transaction type argument by the IRS. Would appreciate your thoughts on
>> this.
>>
>> Thanks,
>>
>>
>> On Sun, Feb 7, 2016 at 4:51 PM, John J. Sullivan <sullaw at comcast.net>
>> wrote:
>>
>>> The RLT is a disregarded entity, so it doesn't matter if he or the RLT
>>> take title to the substitute property.
>>>
>>> Not so the family LLC. I would make sure the two steps are separate
>>> transactions. Maybe wait a months before contributing the new property to
>>> the LLC. All should do it at once so Sec. 721 treatment is clear.
>>>
>>> John Sullivan
>>>
>>> Sent from my iPhone
>>>
>>> On Feb 7, 2016, at 4:38 PM, Jennifer Sohn <jennifer at sohn-law.com> wrote:
>>>
>>> I have a client who is engaging in a 1031 exchange. He recently sold
>>> real property that he owned through his living trust. In purchasing the
>>> replacement property, my understanding is that he needs to purchase it
>>> through his living trust (because that is who sold the relinquished
>>> property) or through an LLC where the living trust is a sole member. He
>>> will purchase the replacement property with his children as
>>> tenants-in-common.
>>>
>>> Soon after the 1031 exchange, he is planning on setting up an LLC with
>>> his living trust and his children (the tenants-in-common) as members. Does
>>> this transaction (putting his interest into an LLC that is owned not solely
>>> by the living trust but also his children) affect the 1031 tax deferral? My
>>> understanding is that he would not be able to purchase through an LLC that
>>> has multi-members, so I am wondering if he is able to do that right after
>>> the 1031 exchange closes.
>>>
>>> Thanks.
>>>
>>>
>>>
>>> --
>>>
>>> Best regards,
>>>
>>>
>>>
>>> Jennifer Y. Sohn
>>>
>>> Attorney at Law
>>>
>>> (Licensed in CA and WA)
>>>
>>> Sohn Law PLLC
>>>
>>> 10900 NE 4th Street, Suite 1850
>>>
>>> Bellevue, WA 98004
>>>
>>> Tel: 206.617.7874
>>>
>>> Fax: 425.732.9748
>>>
>>> Email: jennifer at sohn-law.com
>>>
>>> http://www.sohn-law.com
>>>
>>>
>>>
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>>
>>
>>
>> --
>>
>> Best regards,
>>
>>
>>
>> Jennifer Y. Sohn
>>
>> Attorney at Law
>>
>> (Licensed in CA and WA)
>>
>> Sohn Law PLLC
>>
>> 10900 NE 4th Street, Suite 1850
>>
>> Bellevue, WA 98004
>>
>> Tel: 206.617.7874
>>
>> Fax: 425.732.9748
>>
>> Email: jennifer at sohn-law.com
>>
>> http://www.sohn-law.com
>>
>>
>>
>> Confidential. This electronic mail transmission and any accompanying
>> documents contain information belonging to the sender which may be
>> confidential and legally privileged. This information is intended only for
>> the use of the individual or entity to whom this electronic mail
>> transmission was sent as indicated above. If you are not the intended
>> recipient, any disclosure, copying, distribution, or action taken in
>> reliance on the contents of the information contained in this transmission
>> is strictly prohibited. If you have received this transmission in error,
>> please delete the message. Thank you.
>>
>>
>>
>> Circular 230 Disclaimer. Any U.S. federal tax advice contained in this
>> communication (including any attachments) is not intended or written to be
>> used, and may not be used, for the purpose of (i) avoiding penalties under
>> the internal revenue code or (ii) promoting, marketing or recommending to
>> another party any transaction or matter addressed herein.
>>
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>
>
>
> --
> Mark T. Higgins
> Mark T. Higgins, P.C.
> P.O. Box 57
> Darrington, WA 98241
> 206-491-2420
>
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-- 

Best regards,

Jennifer Y. Sohn

Attorney at Law

(Licensed in CA and WA)

Sohn Law PLLC

10900 NE 4th Street, Suite 1850

Bellevue, WA 98004

Tel: 206.617.7874

Fax: 425.732.9748

Email: jennifer at sohn-law.com

http://www.sohn-law.com

Confidential. This electronic mail transmission and any accompanying
documents contain information belonging to the sender which may be
confidential and legally privileged. This information is intended only for
the use of the individual or entity to whom this electronic mail
transmission was sent as indicated above. If you are not the intended
recipient, any disclosure, copying, distribution, or action taken in
reliance on the contents of the information contained in this transmission
is strictly prohibited. If you have received this transmission in error,
please delete the message. Thank you.

Circular 230 Disclaimer. Any U.S. federal tax advice contained in this
communication (including any attachments) is not intended or written to be
used, and may not be used, for the purpose of (i) avoiding penalties under
the internal revenue code or (ii) promoting, marketing or recommending to
another party any transaction or matter addressed herein.
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