704(c) to 1031 Exchange
Hi all...A and B form an LLC AB in 2019. A contributes $500 K real estate with a basis of $290 K and no mortgage. B contributes $4 K. They take out $250 K mortgage which is distributed to A. B guarantees the mortgage. Going forward they split profits 50/50. The property in AB is rented to a related operating company which are also equally owned by A and B. I treated the $500 K - $290 K = $210 K as an unrecognized section 704(c) gain to A.
2024, B sold his equity in operating company back to A. AB is selling the property owned within AB for $650 K. A would like to do a 1031 exchange.
Can A's unrecognized 704(c) gain be deferred as part of the 1031 exchange? Or is the $250 K previously received now considered boot?
