Is this legitimate replacement property? - Posted by Louis Nero
Posted by Louis Nero on August 05, 2003 at 10:32:25:
Here’s a situation that an LLC for which I prepare income tax returns is facing:
ABC, LLC recently sold vacant land that it held for investment for a huge gain. The proceeds of the sale are being held by a qualified intermediary so that they can obtain a replacement property and defer paying capital gains tax. The partners have been approached by a real estate company that would like to start a joint venture with them, with the intention of purchasing a vacant piece of property on which they would put up condos about a year or two down the road.
Is it possible for ABC, LLC to obtain this vacant land as replacement property and contribute it to a joint venture with this real estate company? Is there a minimum holding period for ABC, LLC to hold the land before contributing it to such a joint venture? I assume that the IRS would frown on ABC, LLC replacing real property with a partnership interest which is considered personal property.
Any help is greatly appreciated. Thanks.