Planning Framework · CA Primary Residence · High-Basis Gain

Three Paths Forward.

Tax preservation, AUM preservation, and estate planning for a highly appreciated California primary residence.

Robert Boladian, CMPS® CLA® · Mission Pacific Mortgage · For advisor and agent use only · Not for client distribution · Confidential

Scenario

$4.5MFMVCA primary residence

$1.0MBasisCost plus improvements

$3.5MEmbedded GainAbout $3.0M taxable after §121 ($500K MFJ)

~$1.11MCash Sale ExposureIllustrative federal, NIIT, and CA exposure

The Three Paths

Path 1 · Hold for Life

Convert. Refinance. Hold.

Tax at sale: $0 because no sale occurs.

Convert the primary residence to a documented long-term rental, then consider cash-out refinancing for liquidity.
Hold through the estate and evaluate §1014 basis step-up at death with tax counsel.
Trade-off: long-term hold, landlord obligations, and market exposure.

Path 2 · §1031 Exchange

Defer & Reposition.

Tax at sale: about $0 deferred, with carryover basis.

After a documented rental period, exchange into qualifying replacement property.
Engage a qualified intermediary before closing and follow the 45-day identification and 180-day closing windows.
Trade-off: replacement risk, strict timing, and active management.

Path 3 · CRT

Eliminate via Charitable.

Tax at sale: $0 inside the trust, with income taxed over time.

Contribute appreciated property to a charitable remainder trust before sale.
The trust sells and provides a lifetime or term income stream.
Trade-off: irrevocable structure, asset leaves the estate, and remainder goes to charity.

Refinance Timing

Three windows. Two are safer. One needs extra caution.

✓ Safer

After Conversion, Well Before Any Exchange

Documented rental use and seasoning can support a cash-out refinance as a debt transaction rather than a sale.

✕ Caution

In Contemplation of a §1031 Exchange

Refinancing shortly before an exchange can create step-transaction and taxable-boot concerns. Coordinate with tax counsel before acting.

✓ Safer

After the §1031 Exchange Closes

Post-close refinancing of the replacement property may provide non-taxable liquidity while the deferred gain remains in the replacement property.

What This Means for the Advisor and Agent

→ For the FA: the framework creates a coordinated planning conversation around AUM, liquidity, taxes, and estate transition.

→ For the luxury agent: the client may be able to execute the next purchase without a contingent sale while preserving flexibility around the original residence.

Bring scenarios early. Sequencing matters.

Review the property, tax history, liquidity need, and financing before the transaction locks the client into one path.

BOOK A PARTNER CALL

This is a strategic planning framework for advisor and agent use. It is not tax, legal, or investment advice and is not for distribution to clients or the public. Every strategy shown requires coordination with the client’s CPA, tax attorney, and qualified intermediary where applicable. Treatment depends on taxpayer-specific facts including filing status, MAGI, residency, entity structure, rental use and seasoning, prior depreciation, and the actual closing statement. Figures are illustrative planning estimates and are not projections of any client’s result. Deferral is not forgiveness. Confirm current tax treatment before acting. Outcomes may vary.

Robert Boladian, CMPS®, CLA® · NMLS #14241 · (760) 828-7444 · [email protected]
Mission Pacific Mortgage · EAB Holdings, Inc. NMLS #1786785 · DFPI Licensed · San Diego, CA