@Michael Caldwell, definitely consult with an RE attorney.

A few rules to keep in mind as you get started: - To get full tax deferral, you have to replace the full value of what you sell. 

I have a tax question.

You certainly can 1031 exchange from CA to Hawaii, although the California Franchise Tax Board will make it a little more annoying by forcing you file a new form (Form 3840) each year after you sell...failure to file the form will result in taxes owed. 

Assuming you are not subject to penalties, do your analysis in after-tax dollars. 

California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k.

I am looking to find the optimal tax and legal structure to optimize his situation.

@Dominique Osborn spent hours with them on the phone and provided receipts on numerous occasions but it's still showing as "not" paid.Anyway, is anyone on here a tax lawyer or can anyone recommend one?

It does everything from rent collection, background checks, credit checks, ID verification, tax preparation, lease signing/preparation, etc. 

As long as you can hold onto the property you can continue to get the appreciation, principal pay down, tax benefits etc.