Legal Question in Real Estate Law in California

You need to get proper tax advice from a professional. I've never heard of someone living somewhere to avoid capital gains tax.

Mr. Roach obviously knows nothing about capital gains taxes on real property. You are correct that you can claim the $250k/single or $500K/married filing jointly exemption if you lived in the property as your principal residence for three of the last five years. As for transferring to an LLC to protect yourself, however, it seems it is you who doesn't know anything. What do you think you can protect yourself from by transferring it to an LLC? If you think you can protect yourself from creditors going after it for liability you personally incurr, you couldn't be more wrong. If someone gets a judgment against you, they can get the property quite easily. They levy on your shares of the LLC. They own the LLC. They sell the house. End of story. Or do you think you can insulate your assets from liability as a landlord by putting the house in the LLC. Well that MIGHT work, but first, it won't protect the house, because of course if the LLC is the landlord and the LLC owns the house, a judgment aginst the LLC will easily get to the house. The only POSSIBLE benefit would be that the judgment creditor would PROBABLY go after the house before trying to collect against your other assets. But as general manager of the LLC, you are very likely to still be personally liable for anything the LLC does wrong. Oh, and taxes? Yes, the transfer to the LLC will be taxed the same as if you sold it as far as transfer taxes and bumped up property taxes. You could PROBABLY avoid paying any gains taxes on it IF you get good tax accounting advice on structuring the transfer.