Moving Out of California — A 1031 Exchange

The Challenge

The client held a long-owned California rental with substantial appreciation and an equally substantial deferred capital gains liability. They wanted out of day-to-day management and out of California, but a straight sale would have triggered a tax bill large enough to erase much of the equity they had spent decades building.

Our Approach

• Modeled the after-tax outcome of a straight sale against a 1031 exchange so the client could see the real difference in spendable proceeds
• Coordinated a qualified intermediary before the sale closed — the single most common point of failure in a 1031
• Identified replacement candidates in lower-cost, landlord-friendly markets that met both the 45-day identification and 180-day closing windows
• Ran cash-flow and cap-rate analysis on each candidate rather than relying on broker pro formas

Outcome

The client closed on replacement property inside the exchange windows, deferred the capital gains liability in full, and moved from a hands-on single rental into professionally managed income property with stronger monthly cash flow relative to basis.