Last Updated June 08, 2018

Law and Practice

Authors



Allen Matkins Leck Gamble Mallory & Natsis LLP is best known for representing clients in the real estate industry and clients for whom real estate is an important part of their success. It has a longstanding reputation as one of the leading real estate law firms in the United States, having assisted clients in the development, management, financing, acquisition and disposition of real property assets. Because Allen Matkins has one of the largest real estate departments on the West Coast – more than 100 attorneys – it can bring to every deal a vast network of resources and relationships with major players in the real estate industry. Key clients include global real estate owners, operators and developers, REITs, private equity firms, state pension funds, life insurance companies and Fortune 100 technology companies. The firm's five offices are located in four major metropolitan areas of California: Los Angeles (Downtown and Century City), Orange County, San Diego and San Francisco.

When real estate is sold, it incurs transfer taxes when a new deed is recorded. A transfer tax may also apply if a controlling interest in the entity that owns the real estate is transferred. This local tax varies by jurisdiction, and may be quite high in certain cities, such as San Francisco and Los Angeles.

Unless otherwise agreed to contractually by the parties, transfer taxes are paid by the selling party.

Any appreciation or gain will generally be subject to state and federal taxes. Who pays that tax is determined by the ownership structure.

Gain from the sale of real estate is generally subject to federal and state income taxes when it is sold. The gain is generally the difference between what the asset sold for and the amount paid to acquire it. Who pays that tax is determined by the corporate structure. Gains may be subject to deferral to the extent a successful 1031 exchange is completed.

The gain will be taxed at either capital gains rates or ordinary income rates for federal income tax purposes. The highest capital gains rate is 20%. In general, the capital gains rate will apply if the property is not owned by a corporation and is held for more than a year in a taxpayer’s trade or business or for investment purposes. California state income tax rates do not differentiate between capital and ordinary gains, and the highest rate at which real estate gains could be taxed is 13.3%. Cities and counties in California do not generally have additional income tax on gains from the sale of real estate.

Generally, California real estate is reassessed for property tax purposes when it is sold. Property taxes are roughly equal to 1% of the purchase price of the asset. State property taxes are paid annually, in twice-yearly instalments, to the local county assessor.

Allen Matkins Leck Gamble Mallory & Natsis LLP

865 S Figueroa Street, Suite 2800
Los Angeles, CA 90017

(213) 622-5555

(213) 620-8816

communications@allenmatkins.com www.allenmatkins.com
Author Business Card

Authors



Allen Matkins Leck Gamble Mallory & Natsis LLP is best known for representing clients in the real estate industry and clients for whom real estate is an important part of their success. It has a longstanding reputation as one of the leading real estate law firms in the United States, having assisted clients in the development, management, financing, acquisition and disposition of real property assets. Because Allen Matkins has one of the largest real estate departments on the West Coast – more than 100 attorneys – it can bring to every deal a vast network of resources and relationships with major players in the real estate industry. Key clients include global real estate owners, operators and developers, REITs, private equity firms, state pension funds, life insurance companies and Fortune 100 technology companies. The firm's five offices are located in four major metropolitan areas of California: Los Angeles (Downtown and Century City), Orange County, San Diego and San Francisco.

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.