As a California resident I would like to perform a 1031 exchange where I sell a Georgia property held in my Georgia single-member LLC (a disregarded entity) and acquire a DST membership interest in my personal name- what do I need to do to make sure it complies with 1031 exchange rules in order to be sure the taxes on the gain of the sale will be be deferred by the IRS, the California FTB, and the Georgia DOR?
To ensure compliance with Section 1031 of the Internal Revenue Code for a like-kind exchange, which allows you to defer capital gains taxes on the sale of an investment property when you reinvest the proceeds into a similar property, you should follow these steps: 1. **Use a Qualified Intermediary (QI)**: Engage a QI before you sell the Georgia property. The QI will hold the proceeds from the sale and help facilitate the exchange process to ensure it meets IRS requirements. 2. **Same Taxpayer Rule**: Since your Georgia property is held in a single-member LLC (which is a disregarded entity for tax purposes), you should be able to acquire the replacement property (DST membership interest) in your personal name and still comply with the "same taxpayer" rule. However, it's important to consult with a tax advisor to ensure that this transaction is structured properly. 3. **Identification Period**: Identify potential replacement properties within 45 days of the sale of your Georgia property. You must provide a written identification of the replacement property to your QI within this timeframe. 4. **Exchange Period**: Close on the new property within 180 days of the sale of the relinquished property or by the tax return due date (including extensions) for the year in which the relinquished property was sold, whichever is earlier. 5. **Like-Kind Property**: Ensure that the DST membership interest qualifies as like-kind to the real estate you sold. Generally, interests in a
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