1031 exchange from a refi?
Hello
it is my understanding that traditionally when you sell your property you can use the 1031 exchange to defer the taxes on the capital gains from the sale. i know a little about that but i am interested to know if when you refinance and not sell the property to pull out equity from a property can u also use the 1031 for that. for example if i use the BRRRR strategy to buy a 4 plex for $300,000 i use a conventional loan and put down 20% of $60,000 making the loan amount for $240,000 and put in $40,000 into rehab the property so i have $100,000 in and the property then appraises at $400,000 so i refinance the property with 20% down of $80,000 in equity making it a loan amount of $320,000 out of that of course the original loan gets paid back of $240,000 leaving me with a check for $80,000. so does that $80,000 count as capital gains? i hear a lot about the transfer of money from a sale but not how to handle moneys from refinance and i am not sure if it is the same in the end. i would say also that this is assuming this all takes place in less than one year? i am aware that if i live in the property for i believe 2 out of 5 years i can write off up to $250,000.
please help me clarify the details a bit guys.
thanks
arlen