We have a rental property under contract to sell for a profit of 55k. (44,500 after paying real estate commissions). If we did a 1030 exchange, then did a cash out refi could we retrieve our cash and avoid capital gains tax?
@Lori Hunter , completing a 1031 exchange and then doing a cash out refi is a brilliant way to access cash for other things while still protecting that $44500 from taxes. You get cash, and the mortgage is paid by the rents!
It does not eliminate the tax but it will move the gain into the replacement property in the 1031. So as long as you own that new property or as long as you do another 1031 when you sell it, you'll never have to pay the tax.
For down the road you'll want to think about using the 1031 to strategically begin to eliminate rather than defer tax but for this one you're in a very good position.