Commentary
On April 1, 2023, a new transfer tax on all real estate transactions in the city of Los Angeles went into effect. The tax is 4 percent on the sales price between $5 million and $10 million and 5.5 percent on sales proceeds over $10 million. Although the impact of this tax on each class of real estate needs careful analysis, our focus will be on Class A office space.
The fact that this new transfer tax only affects real estate transactions located in the City of Los Angeles makes this tax particularly onerous. Whenever something is taxed, you’ll get less of it. But that’s especially the case if investors can simply allocate their funds to areas outside the city of Los Angeles and therefore avoid the Los Angeles city transfer tax on the investor’s ultimate sale….