Seeking Tax Advisor - 4-Unit Oakland Sale / 1031 or DST Strategy+ NY Residency

[Zasa Swanson]

Title: Seeking Tax Advisor – 4-Unit Oakland Sale / 1031 or DST Strategy + NY Residency

Hi BP community,

I’m looking for a real estate-savvy CPA or tax advisor—or anyone experienced with long-term income and legacy planning strategies.

I’m selling a non-owner occupied 4-unit property in Oakland, CA while currently maintaining New York residency, and I’d like to:

• Defer capital gains taxes

• Transition into passive real estate income

• Preserve assets for my children

I’m exploring:

• 1031 Exchange via Delaware Statutory Trust (DST)

• Qualified Opportunity Funds (QOFs)

• And need guidance on CA-to-NY residency tax implications

If you’ve worked with someone knowledgeable—or have insights to share—I’d really appreciate it.

Thanks in advance!

[Dylan Brown]

This is right in my wheelhouse — feel free to reach out if you want to talk through any of this more deeply.

Since you mentioned you're selling a 4-unit in Oakland, I’ll point out something that often gets overlooked: California doesn’t fully conform to the federal §1031 exchange rules, especially when it comes to exchanging CA property for out-of-state property, like a Delaware Statutory Trust (DST).

Here’s what’s important to know:

Even if you do a valid federal 1031 exchange into a DST (or any out-of-state property), California will track the deferred gain tied to your Oakland property and preserve its right to tax that gain later — even if you're no longer a CA resident when the replacement property is sold.

To enforce this, CA requires you to file Form 3840 annually until the replacement property is eventually sold or otherwise triggers gain. If that gain is never reported (i.e., you stop filing 3840s), CA may assume the gain has been realized and assess tax and penalties.

Other things to keep in mind:

• DSTs are fully passive and qualify for 1031, but you give up control. QOFs let you defer only the gain (not full proceeds) and offer long-term tax-free growth, but they don’t work for every situation.

• The gain from your Oakland property will be California-sourced income, so CA gets first dibs on taxing it. Since you're a NY resident, you'll also report it to NY — but NY should give you a credit for CA taxes paid (via Form IT-112-R). Still, there’s always some planning involved to avoid timing mismatches or double taxation.

• A 1031 into a DST can work well for generational planning — especially since DST shares are easily inherited and get a step-up in basis. But in some cases, it may actually make sense to recognize gain now and invest more flexibly if you're thinking long-term wealth transfer.

Let me know if you want to model some scenarios out — I love this stuff and am always happy to help behind the scenes.