Selling a commercial property in California often triggers a significant tax burden, with combined federal and state capital gains taxes, depreciation recapture, and the 3.8% net investment income tax consuming a large portion of your sale proceeds.
While a 1031 exchange can defer taxes, it forces you into a like-kind reinvestment—typically with a tight timeline, limited flexibility, and continued exposure to market risk. For owners looking to exit, diversify, or gain liquidity without reinvesting in more real estate, the 1031 can fall short of strategic financial goals.