A third-generation Central Valley farm family weighs a life-changing offer — and the tax math that determines how much of their legacy actually survives the sale.
The Alvarez family has farmed 450 acres of Kings County ground for three generations — a mixed operation of permanent crops and row crops that has supported the family since the 1960s. In early 2026, an institutional buyer approached them with a firm offer: $28 million.
The children are grown and pursuing careers outside agriculture. Water allocations have tightened. Operating costs keep climbing. The family agrees it may finally be time. But before anyone signs, one question has to be answered honestly: after taxes — how much of that $28 million do we actually get to keep?
Based on 2026 federal and California rates assuming top marginal brackets. Actual liability varies with filing status, other income, basis adjustments, and timing.
The same sale — structured differently. Section 1031 of the Internal Revenue Code allows the family to defer federal and California capital gains, depreciation recapture, and NIIT on all equity reinvested into like-kind replacement property.
Federal LTCG, recapture, NIIT, and California state tax all deferred on reinvested equity.
Roughly $22.66M reinvested — not $12.4M. Every dollar continues compounding instead of paying tax.
A diversified portfolio (direct real estate, triple-net, or blended DSTs) produces monthly income without active operations.
Heirs may receive a stepped-up basis at death — potentially eliminating the deferred gain entirely.
Most analysis a farm family sees about DSTs, 1031 exchanges, and replacement properties comes from broker-dealers and sponsors who earn commissions of 5% to 7% on every dollar placed. Their incentive is the transaction — not the outcome.
Avidity Capital Inc. is different by design. We are a Registered Investment Adviser operating under a fiduciary standard. We charge a flat advisory fee for our work and accept no commissions, referral fees, or revenue-sharing from real estate sponsors, DST issuers, qualified intermediaries, or any third party. That structural independence is what allows us to recommend what actually fits the family — including, sometimes, doing nothing at all.
After walking through the full analysis — and in close coordination with their CPA and estate attorney — the Alvarez family chose a blended path. Roughly 80% of the equity was exchanged into a diversified portfolio of Delaware Statutory Trusts across industrial, medical office, and multifamily assets. The remaining equity was structured through an installment sale funding a family trust for the grandchildren.
The family exited active farming without exiting ownership. The next generation inherited a diversified base of income-producing real estate rather than a single parcel of ground — and approximately $10 million that would have otherwise left the family continues working for them today.
Hypothetical Illustration. The Alvarez Family scenario is a composite example constructed for educational purposes. It does not represent any specific client, transaction, or guaranteed outcome.
Tax Estimates Are Simplified. Calculations apply top federal and California marginal rates for 2026 and do not account for all factors that may affect an actual taxpayer’s liability, including filing status, alternative minimum tax, other income, itemized deductions, and state-specific adjustments.
Not Legal or Tax Advice. This material is educational. Readers should consult a qualified certified public accountant and attorney before making any decisions regarding the sale of real estate, 1031 exchanges, Delaware Statutory Trusts, or estate planning.
Investment Risk. All investments involve risk, including the potential loss of principal. Real estate investments — including DSTs — carry additional risks including illiquidity, sponsor dependence, and tenant concentration. Past performance is not indicative of future results.
Registered Investment Adviser. Investment advisory services are offered through Avidity Capital Inc., a Registered Investment Adviser located in Hanford, California. Registration does not imply a certain level of skill or training. Additional information is available at adviserinfo.sec.gov.
No Commissions. Avidity Capital Inc. does not accept commissions, referral fees, or revenue-sharing from real estate sponsors, DST issuers, qualified intermediaries, or any third party. Clients are billed a flat advisory fee for services provided.