At a 7% annual return, this could grow to $908K after 10 years, providing immediate liquidity and diversification.Alternatively, holding the property could yield $825K net equity after taxes in 10 years, assuming a $900K sale, with the potential to defer taxes via a 1031 exchange if reinvested into another property.

The absolute best way to avoid taxes is not earn income.  

If you live in CA, and your LLC is in OR, you still need to register it in CA and pay the 800 dollar per year LLC tax.

Focus on tax-saving strategies such as cost segregation studies and bonus depreciation to accelerate deductions.By qualifying as a Real Estate Professional (spending 750+ hours annually and materially participating), you can offset your wife’s S-Corp income with real estate losses, reducing your tax liability.

It is tax free in the sense that you will not owe taxes today on the cash-out.

The most effective way to find a professional team to work with is to interview a few to find one that can work with your situation.

@Daniel MadhavapallilYou should hire a tax professional. 

@Tyler Speelman, A 1031 exchange solves the tax issue. 

I'm talking about tax season! 

The tax paid from your lending proceeds should be the equivalent of your tax rate I would think.