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Are you a small business owner or are you a real estate investor looking to see ” Can an S Corp Do a 1031 Exchange”. Answer is YES. As long as you sell the Real Estate that is held under the S Corp and buy another property under the Same S Corp you allowed to do the 1031 exchange. You still have to follow the rules set by IRS for 1031 exchange.
Many business owners buy their business and their business properties under their S Corp. When you sell your business and property, business portion will be taxed as capital gains but the real estate under S Corp can be exchanged into another Real Estate property.
Can I do a 1031 exchange on my business?You cannot do a 1031 exchange on the business goodwill or personal property. You can only do a 1031 exchange on Real Estate and Real Property property only.
So if you own a business and sell that under an S Corp, you cannot do a 1031 exchange on that part of the sale. You may have option to defer the gain by using an installment sale or investing in qualified opportunity zones. See more info by clicking here.
Do You Need an LLC for a 1031 Exchange?No You don’t need LLC for a 1031 exchange. There is no requirement for any entity for 1031 exchange.You can do a 1031 Exchange under your personal name, under S Corp or C Corp and yes even under LLCs.Can a Multi Member LLC Do a 1031 ExchangeYes. A Multi Member LLC do a 1031 exchange. There is no entity restrictions as long as new property is purchased under the same entity.
Why would you not do a 1031 exchange?There can be many reasons when you consider not doing a 1031 exchange. If you don’t have capital gains then you do not need to do a 1031 exchange. Another reason is if you are selling your primary home. In that case you cannot do a 1031 exchange as its not allowed on a primary home.
Benefits of 1031 Exchange
- Instead of paying money in taxes, that money can allow you to buy more properties and roll the gain forward.
- You can save Capital gains taxes approx. 15 to 20 percent
- There could be savings at the state level (this varies by state, so your qualified intermediary should be consulted for this information).
- The amount of income taxes paid could be reduced or eliminated eventually through Step up basis
