Real Estate Tax Planning before the closing date.
For owners and investors who want to plan sales, exchanges, and depreciation before a signed contract locks the decisions in.
Real estate tax planning works best before escrow opens. Once a sale contract is signed, the main choices are largely made: whether to exchange, when gain lands, and which entity reports it. TreeStar's Enrolled Agents model the federal and California results of a sale or exchange, map how depreciation recapture and suspended losses affect the outcome, and review entity structure for new purchases. Where California rules differ, including bonus depreciation and the annual filing for exchanges into out-of-state property, we plan for both returns from the start.
Where it gets complicated
- 01 Recapture at sale
Depreciation claimed over the years is generally recaptured when the property sells, and that portion is taxed differently from the rest of the gain. Owners who estimate only capital gain may underestimate the bill.
- 02 Exchange rules
A §1031 exchange may defer gain on real property held for investment or business use, but the deadlines and intermediary rules are strict. Cash left over or debt that is not replaced may be taxable.
- 03 California differences
California does not follow federal bonus depreciation, so the same building can carry two depreciation schedules. A cost segregation study may produce a different result on the state return than on the federal one.
- 04 Entity choice
How you hold property affects liability, financing, transfers to family, and how income and losses flow to owners. Moving property between entities later can carry tax consequences of its own.
How TreeStar helps
We model gain, recapture, suspended losses, and timing so you can compare selling now, selling later, or exchanging.
→ multistate_tax Coordinate cross-state exchangesWhen replacement property is outside California, we handle the ongoing state reporting and the nonresident filing questions that follow.
→ entity_tax_strategy Choose the holding entityWe review whether individual, LLC, partnership, or S corporation ownership fits each property and how it affects future transfers.
→ business_tax Set depreciation strategyWe keep federal and California depreciation schedules side by side and plan studies and elections with both returns in view.
→What you can expect
Sale and exchange options compared side by side
Federal and California depreciation tracked separately
Entity decisions made before acquisition
Common questions
When should I call you about selling a property?
Before you list it, or at least before you sign a purchase agreement. Exchange planning, timing, and entity questions are easier to address while the options are still open.
If I exchange into property in another state, does California still care?
Yes. California requires an annual information return, FTB Form 3840, when California property is exchanged for out-of-state replacement property. We keep that filing on your calendar each year.
Should I hold rental property in an LLC?
It depends on liability, financing, the number of owners, and your plans for the property. An LLC may not change your federal tax result on its own, so we review the tax side alongside your attorney's advice on liability.
Need a referral?
We work alongside the attorneys, consultants, and other specialists your industry relies on. Tell us what you need and we will make an introduction.
Holds exchange proceeds and manages exchange paperwork.
→ request_referral Cost segregation providerEngineering studies that support accelerated depreciation.
→ request_referral Real estate attorneyPurchases, leases, entities, and title questions.
→ request_referral Commercial lender or mortgage brokerFinancing for acquisitions, refinances, and development.
→Real Estate insights
How a cost segregation study works, when it may make sense, and how 100% federal bonus depreciation and California's separate rules shape the result.
→
How a 1031 exchange works for California property owners, from the 45- and 180-day deadlines to the yearly FTB 3840 filing for out-of-state property.
→