Andres Diaz

Managing Director, Multifamily Investments · Kingside Investment Group

Can You Avoid the Measure ULA Tax When Selling in Los Angeles?

No. There is no legal exemption that lets a seller avoid Measure ULA once a Los Angeles apartment building sale crosses $5,400,000 for closings after June 30, 2026. A 1031 exchange does not defer or avoid it, seller financing does not delay it, and underpricing to dodge the tax is not a real strategy. What sellers can legitimately manage is timing, accurate pricing, and how they plan around the tax with a CPA and attorney.

This question comes up in nearly every conversation Kingside has with a seller whose building sits near the threshold, and the honest answer disappoints a lot of people. Measure ULA is a documentary transfer tax triggered when a deed records, not an income tax that follows federal or state exchange rules. That distinction is the entire reason so many of the "workarounds" sellers hear about at industry meetups and from well-meaning but uninformed advisors simply do not hold up.

This guide walks through every strategy sellers actually ask about, pricing near the threshold, timing around the annual CPI reset, 1031 exchanges, multi-entity structuring, and installment sales, and tells you plainly which ones are legitimate planning tools and which ones are myths that will not survive contact with the LA Office of Finance.

The Short Answer: There Is No Legal Exemption

Measure ULA, codified under Los Angeles Municipal Code Section 21.9.2, is a documentary transfer tax collected at the time a deed records with the county. It applies to sales of real property within City of Los Angeles boundaries once the price crosses a set threshold. For closings on or after June 30, 2026, that threshold is $5,400,000 (4% of the entire price) and $10,900,000 (5.5% of the entire price). Below $5,400,000, no Measure ULA applies at all.

The ordinance does not provide a general exemption for sellers based on how they structure a sale, what they do with the proceeds afterward, or whether they intend to reinvest through a tax-deferred exchange. It is triggered by the recording of the deed, full stop. That is a fundamentally different mechanism than federal or California capital gains tax, which follows the seller's income tax treatment and can be deferred through vehicles like a 1031 exchange.

Because so many sellers first encounter capital gains deferral and Measure ULA in the same conversation, and because both taxes get triggered by the same sale, it is an easy and understandable mistake to assume the same planning tools apply to both. They do not. Every legitimate strategy covered in this guide works within that constraint, not around it.

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Myth vs. Reality: Every Strategy Sellers Ask About

Below is a straight comparison of every Measure ULA workaround Kingside hears about from sellers, brokers, and online forums, with an honest answer on whether it actually reduces exposure.

Two rows in that table are legitimate: accurate fair market pricing that happens to land under the threshold, and a property that simply sits outside City of LA boundaries. Everything else ranges from partially useful with real limits, to a myth that will not hold up, to a legal risk not worth taking.

Why a 1031 Exchange Does Not Avoid Measure ULA

This is the single most persistent myth Kingside encounters, and it deserves a direct answer: a 1031 exchange does not defer, reduce, or avoid Measure ULA in any way. A 1031 exchange defers federal and California capital gains tax and depreciation recapture by rolling the gain from a relinquished property into a replacement property, following IRS and California FTB rules on timing, like-kind property, and reinvestment of proceeds.

Measure ULA is not a capital gains tax. It is a local documentary transfer tax that is triggered the moment a deed records with LA County, regardless of what the seller does with the sale proceeds afterward. Whether those proceeds go into a qualified intermediary's exchange account, a new property purchase, or the seller's personal bank account, Measure ULA is already owed by the time that decision gets made. The tax is paid out of gross proceeds at close of escrow, before the exchange mechanics even begin.

Here is the sequence that makes this clear. A seller closing a $7,000,000 Los Angeles apartment building sale owes 4% Measure ULA, or $280,000, the moment the deed records. That $280,000 leaves the transaction at closing. It is never available to move into the qualified intermediary's exchange account, because it was never part of the net proceeds that reach the intermediary in the first place. The seller is 1031 exchanging what is left after ULA, standard transfer tax, and other closing costs are already deducted, not the full $7,000,000 gross sale price.

This has a real consequence for exchange planning that goes beyond simply knowing the tax exists. Kingside advises LA apartment owners structuring 1031 exchanges around Measure ULA, the 45-day identification window, and California FTB clawback rules, because underestimating available exchange equity by a quarter million dollars or more can be the difference between fully deferring gain and creating an unintended boot situation that triggers partial taxation on the exchange itself. A seller who plans a replacement property purchase based on the gross sale price, without subtracting ULA first, will show up to escrow on the replacement side short of the equity needed to fully defer their gain.

None of this changes if the exchange involves a Delaware Statutory Trust, a reverse exchange, or a replacement property outside California. The ULA obligation on the Los Angeles relinquished property is fixed at the moment that deed records, independent of every downstream decision in the exchange.

For the exact dollar amounts owed at different sale prices, including how the $280,000 example above scales at other thresholds, see Kingside's companion guide, How Much Is the Measure ULA Tax When Selling an Apartment Building in Los Angeles?

Pricing Near the Threshold: What Actually Works

Because Measure ULA taxes the entire sale price once a building crosses $5,400,000, not just the amount above the line, pricing genuinely matters to net proceeds. But there is a hard distinction between two very different things sellers sometimes conflate: pricing a building accurately at its true fair market value, versus artificially underpricing it to duck the tax.

If a building's real, appraised, market-supported value is $5,250,000, listing it at that price is not a workaround. It is correct pricing, and it happens to fall under the threshold. A seller in that position should not feel pressure to inflate the price closer to $5,400,000 just because a higher number sounds better, since crossing the line at $5,410,000 would trigger $216,400 in Measure ULA on a sale that only cleared $10,000 more than a threshold-free price would have.

What does not work, and what Kingside will not advise a client to do, is pricing a building meaningfully below its actual fair market value specifically to engineer a number under $5,400,000. This creates real problems beyond the ethical and legal exposure. Lenders underwriting the buyer's loan will flag a sale price that does not match comparable sales or appraised value, which can blow up financing entirely. An appraisal gap between contract price and market value invites scrutiny from the buyer's lender, the buyer's own due diligence, and potentially the city itself if the discrepancy is significant. A seller who structures a sale price around avoiding tax rather than around what a willing buyer would actually pay for the asset is taking on legal and financing risk that usually outweighs whatever ULA amount they were trying to save.

The legitimate version of pricing strategy near the threshold looks like this: get an accurate valuation first, understand where your building genuinely sits relative to $5,400,000 or $10,900,000, and then make pricing decisions based on the real number, not a manufactured one. If the building is worth $5,600,000, no amount of creative pricing changes that reality without creating bigger problems than the tax itself.

Timing Around the Annual Threshold Reset

Measure ULA's thresholds adjust every year on July 1, based on the BLS Chained Consumer Price Index. For closings on or after June 30, 2026, the thresholds moved from $5,300,000 and $10,600,000 up to $5,400,000 and $10,900,000. That is a real, predictable, annually recurring shift, and it creates a legitimate timing consideration, not a loophole, for sellers whose sale price is already borderline.

Here is the distinction that matters. If a seller already intended to sell around a certain time of year, and their building's likely sale price sits close to the current threshold, understanding where the annual reset lands can inform when within that window they choose to close. A building expected to sell for roughly $5,350,000 that closes before July 1, 2026 crosses the old $5,300,000 threshold and owes 4% tax on the full price. The same building, at the same price, closing after July 1, 2026 falls under the new $5,400,000 threshold and owes nothing. That is not tax avoidance. That is a seller who was already planning to sell around that time, aware of a public, formulaic, government-published date that changes what they owe.

This is meaningfully different from artificially delaying or accelerating an otherwise unrelated sale purely to game the reset date. If a seller was planning to sell in March but pushes the closing to July purely to chase a threshold that may or may not move enough to matter, they are taking on carrying costs, market risk, and interest rate exposure for an outcome that is not guaranteed until the city actually publishes the new number. The Los Angeles Office of Finance typically confirms the exact updated thresholds close to the reset date, and the exact final number is not locked until that publication happens.

The practical takeaway: if your sale timeline is already flexible and your price is genuinely close to a threshold, it is worth checking the LA Office of Finance's published FAQ in the weeks leading up to July 1 before locking a closing date. If your timeline is driven by other factors, business need, portfolio strategy, market conditions, chasing the reset date alone is rarely worth the added risk.

Multi-Entity and Multi-Parcel Structuring

Sellers with larger or mixed-use portfolios sometimes ask whether splitting a sale across multiple LLCs, multiple parcels, or multiple closing dates can keep each individual piece under the $5,400,000 threshold and avoid triggering Measure ULA on what is functionally a single transaction. The honest answer is that this is far more legally complicated than it sounds, and it often does not work.

The Measure ULA ordinance includes anti-avoidance and aggregation provisions specifically aimed at related transactions. A structure that separates a single economic sale into multiple technically distinct transfers, to the same buyer, around the same time, as part of what is functionally one deal, can be aggregated back together by the city for purposes of calculating the tax owed. The city is not required to treat artificially fragmented transactions as separate for ULA purposes if they are, in substance, one sale.

This does not mean every multi-parcel or multi-entity transaction is automatically suspect. A seller who genuinely owns two unrelated properties, sold to two different buyers, at two different times, for independent business reasons, is not doing anything artificial. The risk shows up specifically when the structuring exists primarily to avoid crossing the ULA threshold rather than for any other legitimate business purpose. That is exactly the kind of fact pattern the aggregation provisions are designed to catch.

This is not a strategy Kingside recommends pursuing without a transactional real estate attorney and a CPA actively involved from the earliest planning stages, and even then, sellers should go in expecting that a structure built primarily to avoid the threshold is more likely to fail scrutiny than succeed. If you own a larger portfolio and are weighing how to sequence a sale, the more productive conversation is usually about market timing and buyer pool, not about trying to outmaneuver an anti-avoidance provision.

Installment Sales and Seller Financing

Sellers sometimes ask whether structuring a sale as an installment sale, where the buyer pays over time instead of all at once, or using seller financing, changes when or whether Measure ULA is owed. It generally does not. Measure ULA, like standard documentary transfer tax, is collected at recording of the deed, based on the full consideration or value of the property interest conveyed. The obligation attaches when the deed transfers, not when the buyer finishes paying for the property.

This means a seller who agrees to seller financing, carrying a note so the buyer pays over five or ten years, does not get to spread the ULA payment out over that same period. The full tax is calculated on the full sale price and is generally due at the time the deed records and the transaction closes, the same as a traditional all-cash sale.

One nuance worth flagging honestly: published guidance from the LA Office of Finance addresses standard sale structures clearly, but does not lay out detailed treatment for every possible installment sale or seller-financing variation. If you are structuring a sale with a deferred payment component, confirm the exact ULA treatment and timing with the LA Office of Finance directly, or through your escrow officer and closing attorney, before assuming any deferral is available. Do not build a pricing or cash flow plan around an assumption that installment structuring reduces or delays the ULA obligation without that confirmation in hand.

What to Do Instead of Chasing a Workaround

Once you accept that there is no legal exemption for a qualifying sale, the useful question changes from "how do I avoid this" to "how do I plan around this correctly." That shift produces better outcomes than any of the workarounds sellers ask about.

None of this is legal or tax advice, and it is not a substitute for a conversation with your own attorney and CPA. Sellers whose buildings sit near either Measure ULA threshold, or who are weighing a 1031 exchange, installment sale, or multi-entity structure, should consult a real estate attorney and a CPA before finalizing a pricing or structuring decision. What Kingside can do is model your building's likely sale price and ULA exposure accurately, so the professionals advising you on the legal and tax side are working from real numbers instead of estimates.

For a full breakdown of the exact 2026 rate structure, worked examples at real price points, and how Measure ULA compares to standard transfer tax, see Kingside's companion guide on how much the Measure ULA tax actually costs when selling an apartment building in Los Angeles.

Frequently Asked Questions

Andres Diaz

Managing Director, Multifamily Investments • CA DRE #01956479

Andres Diaz has closed 169 multifamily transactions totaling $336.5M and 1,700+ units across LA County. He advises LA apartment owners structuring 1031 exchanges around Measure ULA, the 45-day identification window, and California FTB clawback rules, and models Measure ULA exposure into every net proceeds estimate before a building goes to market.

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