What is the best way to sell a property to avoid taxes?

[Walter Correia]

I am planning on selling my investment property, however, I absolutely need to invest the proceeds. I would also like pay off debt in the process as well. What is the best route to take? 1031 exchange? Or take the proceeds and invest later? Here are the numbers: Loan on the property: 262k Value: 365k Depression recapture 18k.

[Dave Foster]

@Walter Correia, the loan on the property doesn't give you a true picture of your tax situation.  You mentioned 18K of depreciation recapture - that's $4500 in tax right there.  Then you've got to see what your'e true gain position is - The net sales price you anticipate minus the adjusted cost basis of the property.  That will tell you what your tax liability would be if you don't do the 1031.

@Marc Winter is exactly right - you can do a cash out refi after you complete a 1031 and use that money to pay off debts.  Although that's like robbing Peter to pay Paul.

It really comes down to what hurts worse - paying interest on debt or taxes on profit.