Re: 1031 exchange to land development LLC - Posted by ray@lcorn
Posted by ray@lcorn on August 14, 2007 at 16:11:32:
You can’t exchange real estate for a partnership interest in an LLC. That’s non-qualified property.
If the deal were structured as a TIC (Tenants in Common) in which each investor receives title to a a deeded interest in the property, it would qualify. But this is a development deal and further complicates things.
The development aspect brings in the improvement exchange rules, which specifies levels of completion, qualified idicia of ownership during the construction period by an accomodator, and carries the same closing deadline of 180 days. That’s an advanced strategy and requires a level of expertise you won’t find except i specialized QI firms. The likelihood of getting all that done and construction complete on a deal that’s not yet funded is probably nil.
As to the debt requirement you’d have to assume some portion of the debt to avoid mortgage boot, which is taxable unless offset by cash boot added or given up in the exchange.
It appears this deal is not going to work for your exchange. To advise further I’d need to know what your goals are for a replacement property, e.g. return requirements, investment plan, management type, etc.
p.s. for an excellent library of articles about exchanges and exchange strategies, see Bill Exeter’s site at www.exeterco.com. The library link is http://exeterco.com/EEL_ArticlesPublicationTechnicalReference.aspx