{ “@context”: “https://schema.org”, “@type”: “FAQPage”, “mainEntity”: [ { “@type”: “Question”, “name”: “What is an installment sale and when does it make sense for real estate?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Installment sales make the most sense when: (1) you can’t find a suitable 1031 replacement property; (2) you want to generate passive income from the sale proceeds; (3) spreading the gain over multiple years keeps you in lower tax brackets; or (4) you’re approaching retirement and want to match income recognition with your lower-income years. KDA’s Los Angeles real estate CPA team has structured installment sales for dozens of investors and will show you exactly how the tax math works for your specific property.” } }, { “@type”: “Question”, “name”: “What is a Qualified Opportunity Zone investment and how does it compare to a 1031 exchange?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Opportunity Zones and 1031 exchanges serve different purposes. A 1031 exchange defers both capital gains AND depreciation recapture by reinvesting in like-kind real estate. A QOZ investment defers only capital gains (not recapture) but can eliminate tax on future appreciation entirely after 10 years. QOZ investments also accept gains from stock sales, business sales, and other assets — not just real estate. KDA’s Los Angeles real estate CPA team will model both strategies and recommend the optimal approach for your exit.” } }, { “@type”: “Question”, “name”: “What is a cost segregation study and how does it save taxes?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “A cost segregation study is an engineering-based tax analysis that reclassifies components of your real estate from 27.5-year (residential) or 39-year (commercial) depreciation to 5-, 7-, or 15-year property. This accelerates your depreciation deductions dramatically. For example, a $500,000 rental property might have $100,000–$150,000 reclassified to shorter-lived assets, generating $100,000+ in first-year deductions when combined with 100% bonus depreciation. KDA’s Los Angeles team coordinates cost segregation studies and integrates them into your overall tax strategy.” } }, { “@type”: “Question”, “name”: “How do I prove material participation in my short-term rental to the IRS?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The IRS scrutinizes STR loophole claims closely, so documentation is critical. You need a contemporaneous time log — kept in real time, not reconstructed after the fact — recording every hour spent on your rental: guest communication, cleaning coordination, maintenance, bookkeeping, marketing, and property management. For the 100-hour test (the most accessible), you need to document that you spent at least 100 hours AND more hours than any other person (including your property manager). KDA’s Los Angeles team will set up your documentation system and review it quarterly.” } }, { “@type”: “Question”, “name”: “Can a real estate CPA help me if I only own one rental property?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Yes — and in many cases, a single rental property owner benefits the most from professional guidance because they’re less likely to know the strategies available to them. A cost segregation study on a single property can generate $15,000–$40,000 in first-year deductions. Proper passive activity loss tracking can unlock deductions in future years. KDA’s Los Angeles team makes these strategies accessible to investors at every level.” } }, { “@type”: “Question”, “name”: “Should I hold my rental properties in an LLC?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “An LLC provides liability protection — separating your personal assets from your rental properties — but it does NOT provide tax benefits for most rental property owners. A single-member LLC is a disregarded entity for tax purposes, meaning it’s taxed identically to owning the property in your own name. The tax benefits of an LLC come from the liability shield, not the tax structure. KDA’s Los Angeles team recommends LLCs for liability protection while ensuring the tax structure is optimized separately through depreciation strategies, REPS, and entity elections.” } }, { “@type”: “Question”, “name”: “How do I handle the tax implications of a short sale or foreclosure on rental property?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “A short sale or foreclosure on rental property creates two potential tax events: (1) cancellation of debt (COD) income — if the lender forgives debt exceeding the property’s value, the forgiven amount is generally taxable income; (2) gain or loss on the disposition — calculated as the difference between the debt discharged (the ‘amount realized’) and your adjusted basis. For Los Angeles investors, the COD income may be excludable if you’re insolvent at the time of the foreclosure (the insolvency exclusion). KDA’s team will calculate your tax exposure from a short sale or foreclosure and identify all available exclusions.” } }, { “@type”: “Question”, “name”: “How does California’s 13.3% income tax rate affect real estate investors?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “The 13.3% California income tax rate is a major factor in every real estate investment decision for Los Angeles investors. It makes the 1031 exchange even more critical — a $500,000 capital gain triggers $66,500 in CA state tax alone, on top of $100,000+ in federal tax. It also makes the STR loophole and REPS more valuable — a $200,000 deduction saves $26,600 in CA taxes. KDA’s Los Angeles team incorporates California’s tax structure into every investment analysis and exit strategy.” } }, { “@type”: “Question”, “name”: “What is the Section 121 exclusion and can I use it for investment property?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “Section 121 is the primary residence exclusion — not an investment property tool. But for Los Angeles investors, there is a strategic opportunity: convert an investment property to your primary residence, live there for 2+ years, and then sell with up to $500,000 in tax-free gains. The catch: depreciation recapture is not excluded (it’s taxed at 25%), and gains attributable to periods of non-qualified use (when it was a rental) are not excluded. KDA’s team will model whether a primary residence conversion makes sense for your specific property.” } }, { “@type”: “Question”, “name”: “Does California conform to federal 1031 exchange rules?”, “acceptedAnswer”: { “@type”: “Answer”, “text”: “California conforms to IRC Section 1031 for exchanges of California real estate into California replacement property. The complication arises when you exchange out of California into another state — California’s ‘clawback’ law (effective 2014) requires you to file FTB Form 3840 annually and pay California tax when the out-of-state replacement property is eventually sold. This makes exchanging out of California a complex decision that requires careful planning. KDA’s Los Angeles team will model the California clawback impact before you proceed with any out-of-state exchange.” } } ] }