Shawn Lavi, CPA (principal) handles the exchange work, with Elias Lavi, CPA (co-owner and founder). We're a 12-person firm at 7707 Sunset Blvd. Elias founded the practice about 40 years ago, and Shawn has been with the firm since 2003. Both hold active California CPA licenses.
You'll still need a qualified intermediary to hold the sale proceeds. Federal rules bar anyone who acted as your agent in the past two years, your CPA included, from serving as your QI. We work with your QI, broker and escrow so the return reports the exchange the way we planned it.
Who does what on the team: CPA vs QI vs attorney for a 1031. Choosing the replacement: DST vs. another rental property.
Use the 1031 exchange calculator for the 45-day and 180-day dates, realized gain, and boot. It is an estimate. It does not hold funds, and it is not a qualified intermediary. If the property is in more than one LLC, see CPA for investors with several LLCs.
LA 1031 exchange: consultant vs CPA
In Los Angeles, a 1031 consultant is usually a qualified intermediary, an exchange company, or someone selling a replacement property. They move the sale proceeds or offer you a property. They do not prepare Form 8824 or the California return. A CPA models boot, basis, depreciation recapture, and the California clawback. Then the CPA files the returns that report the exchange.
Federal rules also bar your CPA from acting as your QI if that CPA has been your accountant in the prior two years. Hire the QI to hold the funds. Hire the CPA for the tax. For more on who does what, see CPA vs QI vs attorney.
If you already have a sale under contract, or you are deciding between a taxable sale and an exchange, book a consultation. Bring the purchase history, depreciation schedules, and any draft closing statements. Early review beats fixing a broken exchange after the 45-day clock has started. Investors outside Los Angeles who want a scoped, remote plan (not a QI engagement) can use the nationwide 1031 Exchange Tax Plan.
How a 1031 exchange works
Section 1031 of the Internal Revenue Code allows you to exchange real property held for investment or productive use for other real property of like kind and defer the gain. After the Tax Cuts and Jobs Act, like-kind exchange is available only for real property — not personal property, not equipment, not goodwill. For most real estate investors, that is fine: one building for another building.
The deferral is not permanent. It rolls the gain into the replacement property, reducing your basis there. When you eventually sell for cash, the deferred gain is recognized. Many investors string exchanges together over decades, then pass highly appreciated property to heirs. If the property is held until death and qualifies for a Section 1014 basis adjustment, heirs generally receive a basis tied to fair market value. That may eliminate much or all of the built-in income-tax gain, although ownership structure, estate inclusion, and statutory exceptions must be reviewed.
Have a capital gain and weighing other deferral routes? See opportunity zone gains due December 31, 2026. For a gain you would invest after 2026, see California's 620 Opportunity Zone 2.0 tracts.
The deadlines: 45 days and 180 days
Two clocks start the day you close the sale of your relinquished property:
- 45 days to identify replacement property. You must deliver a written, signed identification to your qualified intermediary within 45 days.
- 180 days to close on the replacement property. The 180-day period includes the 45-day identification period — you do not get 45 + 180. The 180-day period is also cut short by your tax return due date unless you extend.
Both deadlines are calendar days. Weekends and ordinary holidays do not extend these periods. Limited relief may apply in qualifying federally declared disasters. If day 45 falls on a Sunday, the deadline is still Sunday.
The identification rules
You can identify replacement property under one of three rules:
- Three-property rule: Identify up to three properties, regardless of value.
- 200% rule: Identify any number of properties as long as their total value does not exceed 200% of the relinquished property's value.
- 95% rule: Identify any number of properties of any value, but you must acquire at least 95% of the total value identified.
Most investors use the three-property rule. The 200% rule is useful when you need flexibility on price. The 95% rule is rarely used because it requires you to actually close on nearly everything you identify.
Boot: when you pay tax inside an exchange
"Boot" is any non-like-kind property you receive in the exchange — cash, debt relief, or personal property. You are taxed on boot to the extent of gain realized. If you sell for $1M with a $400K basis and $600K gain, and you receive $50K of cash at closing (the rest reinvested), you pay tax on $50K and defer the remaining $550K. Debt relief works similarly: if your relinquished property had a $300K mortgage and your replacement has a $200K mortgage, the $100K difference is boot. If a cost segregation study split out Section 1245 property, some depreciation recapture can be taxed even in a full exchange unless the replacement property has enough Section 1245 property.
A 1031 does not erase City of Los Angeles transfer tax. See Measure ULA for LA investors.
California conformity
California conforms to Section 1031 for real property exchanges, which means the deferral applies on your California return as well as your federal return. From 2019 through 2024, California let individuals under $250,000 of AGI ($500,000 joint or head of household) exchange personal property. For tax years beginning in 2025, California is real-property-only too. Fixtures and equipment in a transaction are generally boot on both returns. We track the California basis separately so the deferred gain is correctly reported when the chain of exchanges ends.
But if you trade California property for property in another state, California doesn't let go of the gain. It keeps track of the deferred California gain and taxes it when you sell the replacement property in a taxable sale, even if you've moved out of California by then.
To track this, California requires Form FTB 3840 for the year of the exchange and every year after, until the deferred gain is recognized. We file it with your return each year and keep your California basis next to the federal one. Our Form 8824 and FTB 3840 guide explains what goes on each form.
Two other California items show up at closing. A qualifying exchange is exempt from California's 3⅓% real estate withholding at closing. You certify it on Form 593 to escrow or your QI. If you take more than $1,500 in cash or other boot, the QI withholds on it, and if the exchange fails, the QI withholds 3⅓% of the sales price. And a 1031 doesn't avoid the City of Los Angeles Measure ULA transfer tax (Measure ULA for LA investors).
Reverse exchanges and build-to-suit
In a standard (forward) exchange, you sell first and buy second. In a reverse exchange, you acquire the replacement property first, then sell the relinquished property. The IRS allows this through Revenue Procedure 2000-37, but the qualified intermediary (or an exchange accommodation titleholder) must hold title to one of the properties — you cannot own both simultaneously. Reverse exchanges are more complex and more expensive, but they let you move on a desirable replacement property before your sale is ready.
A build-to-suit (or construction) exchange lets you use exchange proceeds to improve replacement property — new construction, renovations, or land improvements. The 180-day deadline still applies, so the construction must be substantially complete by day 180. This is powerful for investors who want to exchange into a property that needs work, but it requires tight coordination with the contractor and the intermediary.
Delaware Statutory Trusts (DSTs) as replacement property
A DST is a fractional ownership interest in a single large property, structured so it qualifies as like-kind replacement property. DSTs solve two common problems: investors who cannot find a suitable property within 45 days, and investors who want to go passive (no management) after a sale. The trade-off is that you give up control — a DST is a security, and you cannot make operating decisions. For the right investor, a DST is a legitimate exit from active management while preserving the deferral. The comparison with buying another rental, including California Form 3840, is on DST vs. another rental property.
The mistakes that break an exchange
- Touching the cash. You cannot receive the proceeds, even briefly. They must go to a qualified intermediary. If your closing agent wires them to you "just for a day," the exchange is dead.
- Missing the 45-day identification. There is no ordinary extension; limited relief applies only in qualifying federally declared disasters. If you identify on day 46, it generally does not count.
- Identifying the wrong property. The legal description on the identification must match the property you actually close on. Use the assessor's parcel number and the legal description from the deed to avoid ambiguity.
- Not reinvesting all proceeds and all debt. To defer all gain, you must reinvest all cash and replace all debt (or add equivalent cash).
How we help
- During the exchange: we review your 45-day identification with you and keep the day-45 and day-180 dates in front of you and your QI.
- Boot check: we go over the cash, debt and personal property on the closing statements with you before you sign, so taxable boot doesn't catch you off guard. (how boot works)
- Filing: Form 8824, carryover basis and new depreciation schedules, the California return, FTB 3840 every year it applies, and the entity returns (1065, 1120-S, 565/568) when an LLC or partnership is the exchanger.
We are not your qualified intermediary. That is a separate, independent party. We handle the tax side: we review your identification with you, keep the 45- and 180-day dates in front of you, roll basis forward on your federal and California returns, and track the deferred gain for the day the chain ends. You and your QI remain responsible for the exchange documents and meeting the deadlines. If you are a Los Angeles or California investor considering an exchange, the planning conversation should happen before you list — not after you are in escrow. For a nationwide one-time tax consulting engagement, see the Nationwide Exchange Tax Plan.
Frequently Asked Questions
Does California tax a 1031 exchange?
Not at the time of a qualifying exchange. California conforms to Section 1031 for real property, so the deferral applies on your California return as well as your federal return. The deferred gain rolls into the replacement property's California basis and is taxed when there is a later taxable sale. If you exchange California property for out-of-state property, California keeps tracking that gain through annual Form FTB 3840 filings.
Do the 45-day and 180-day deadlines apply in California?
Yes. California follows the federal identification and exchange periods. Replacement property generally must be identified within 45 days and received by the earlier of 180 days after the transfer or the taxpayer's return due date, including extensions.
Does California allow 1031 for personal property?
Not for tax years beginning in 2025 or later. Federal like-kind exchange has been real-property-only since 2018. California allowed some individuals with AGI under $250,000, or $500,000 on a joint or head of household return, to exchange personal property through 2024, and now follows the federal real-property-only rule.
My property is in an LLC and my partners want cash. Can I still do a 1031?
Often, yes, but you need to plan months before the sale. The usual route is a drop-and-swap. The LLC distributes the property to the members before the sale, so each owner can choose cash or an exchange. Timing and lender consent matter. See our drop-and-swap guide.
What does a 1031 cost?
We quote a fixed fee after a free review of your books, once we know the properties and entities involved.