this financial environment that is likely to be experienced in 2026, a number of business owners are left asset-rich but cash-poor. Having high-value commercial real estate as a part of the balance sheet, the urge to tap that equity to grow or to settle debt becomes great.

Although the conventional refinancing can be used, the Sale and Leaseback (SLB) has become one of the best options when seeking quick cash. But here is the question: can you withdraw the cash without a huge tax bill at the hands of the IRS or the CDTFA?

Is A Sale And Leaseback Better Than A Traditional Commercial Loan?

Liquidity-wise, yes. A standard bank loan usually funds less than 60 and 80 percent of the worth of the property (Loan-to-Value). On the contrary, a sale and leaseback will give 100% cash value of the property in the fair market. Experienced IRS tax experts (former IRS tax agents, former auditors, and experienced tax attorneys from Sherman Oaks) can help with tax minimization.

Since it is a sale and not a loan, it does not become an issue on your balance sheet. It is instead a conversion of a fixed asset to liquid capital, which enhances your debt-to-equity ratio and leaves the rest of your credit lines available to run your business. The facility remains under your use via a long-term lease, which does not create a hitch to your business "mission control."

Does The IRS Treat The "Sale" Portion As A Taxable Event?

This is the biggest risk of a tax hit. Upon the sale of the property to the investor, you have to acknowledge a capital gain on the difference between the purchase price and the adjusted basis of the property. This may mean having a huge tax bill, especially when the building has been in your possession and its value has greatly increased.

It is an offset, however, in 2026, smart owners take advantage of the One Big Beautiful Bill Act (OBBBA). Through a sale-leaseback timed to large capital investments, you can utilize the permanent 100% bonus depreciation of new equipment or Qualified Production Property (QPP) to give rise to a so-called loss against which the capital gain of the actual sale of the real estate is sheltered.

How Does CDTFA Regulation 1660 Protect You From "Double Taxation"?

One of the prevailing issues in California is whether the sale of equipment/fixtures will be taxable, as well as the subsequent lease payments. The Regulation 1660 at CTDFA explains a vital safe harbor referred to as the 90-Day Rule.

When you purchase equipment, pay sales tax on the purchase, and carry out a sale-leaseback within 90 days of the first functional use, the sale and leaseback is treated more as an Acquisition Sale and Leaseback. Experienced IRS tax experts (former IRS tax agents, former auditors, and experienced tax lawyers from Oakland) who can safeguard from CDTFA regulations.

The lease payments will not be subject to additional use tax as directed by this rule. Any failure to do so within this 90-day window, though, may cause the CDTFA to consider your lease payments a taxable continuing sale and tax you once again on the same property.

Conclusion

The most effective method of liquidating property equity is by way of a sale and lease-back, although that is not a miracle or tax-free. Applying the 90-day window offered by the CDTFA and optioning either a True Lease format or a Financing Transaction format, you are able to tailor the cash infusion to achieve your growth objectives in 2026 without giving away an enormous portion of your equity to the government.