Case Study
Commercial Property

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.

TaxWealth's Planning Approach

TaxWealth’s approach allows commercial property owners to exit their assets without being locked into a reinvestment requirement like a 1031 exchange. By legally shifting the timing of tax payments and unlocking immediate liquidity, clients retain more of their proceeds, gain greater financial flexibility, and have the freedom to redeploy capital according to their own goals—all within full compliance of the tax code.

The Problem

A property owner sold a commercial building in California for $3,750,000. Under a conventional sale, they faced a tax burden of $1,069,385, leaving only $1,580,615 in after-tax proceeds. Nearly 29% of the sale was lost to taxes, limiting reinvestment options and liquidity.

The Solution

Using TaxWealth’s planning strategy, the client postponed all tax payments legally and received a net distribution of $2,421,419. After allocating a portion to fund future taxes, they retained $2,235,228 in available funds—gaining 37.6% more capital compared to a conventional sale.

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