I have recently sold a property and the funds are being held by an accomodator. I hold title in a Sub Chapter S corp. I have several partners that wish to come in with me to buy the identified property so I am forming an LLC in order to take title as undvided interest along with my interest.

 It would be a lot simpler in the future if we were all part of this newly formed LLC including my S-corp, but I am told that I must complete the exchange with the same title as I bought it. My S-Corp has other business than just holding land so I cannot add the new partners to it directly. My question to you is that is there a way for my s-corp to exchange into this newly formed LLC and have the LLC own the property 100%? Otherwise I am stuck with two undivided interests, LLC and S-corp, and that will make future decision tougher..

Thanks

The answer depends. 

The S Corporation can sell its relinquished property and acquire the like-kind replacement property by setting up the new limited liability company (LLC) and having the new LLC acquire 100% (or a partial or fractional interest) of the replacement property if the S Corporation is the sole member of the LLC.  This new LLC would be considered a single member LLC in this case, which would be considered a disregarded entity for income tax purposes, and is treated as if the S Corporation acquired a direct interest in the real property. 

However, if the S Corporation sets up the new LLC, the LLC acquires 100% of the property, and the LLC has multiple investors/members, the LLC is now treated as a partnership and not a single member, disregarded entity.  The 1031 exchange would not qualify in this case because an S Corporation sold relinquished property and a completely different legal entity (the LLC/partnership) acquired the like-kind replacement property. 

There are a number of ways to work around this issue depending on the transaction and the ultimate goal of the investors for the property.  You may want to structure the entire acquisition as a tenant-in-common arrangement so that each investors has the ability and flexibility to 1031 exchange at the back end if they qualify for 1031 exchange treatment.  You could structure it as a tenant-in-common arrangement initially and hold this way for at least 12 months (longer is safer) and then contribute/consolidate the property and investors into one LLC. 

I would be happy to talk with you about this transaction if you like.  Just call. 

Please keep Exeter 1031 Exchange Services, LLC in mind for your next 1031 exchange transaction.