Re: 1031 Exchange - from proprietorship to LLC? Need ideas on how to structure - Posted by Bill (OH)
Posted by Bill (OH) on April 28, 2000 at 08:00:25:
You need to talk to the folks at Starker Services. They hold billions of dollars in exchange money and are one of the major ‘shaker and movers’ in this area. Their web address is:
Or call: 1-800-332-1031
One way to solve your problem is to exchange stock in the new corporation for the property and then put the property through the exchange. If the property is already in the exchange process, I’d say talk to the folks at Starker to see if there is a way to do this. A good reference book for these exchanges is:
‘Real Estate Exchange’ by Howard A. Zuckerman and Rochelle Stone.
One thing I can tell you is that these exchanges are not designed for fast rehabs. In general, to stay off the IRSs’ radar, you need to hold onto these properties for at least a year. Remember, the purpose of a 1031 exchange is to get around the Fed. ‘recapture of depreciation’, ‘capital gains’ tax, and state taxes. So, you’re looking at long term projects. BTW, these exchanges work great matched up to lease/options. You simply put in the lease that the property will be sold through a 1031 intermediary when the option is exercised.
For short term rehabs, many accountants/attorneys suggest a ‘subchapter S’ corporation because you can take some of your income in the form of dividends which are taxed at a lower rate. Good luck!