Calling on CPAs

[Chase Shank]

I am selling a flip and expecting a 40k profit. Here's what I want to know:

Can I do a 1031 to acquire a property for 130k, using the full 40k for a down payment. Then pull 70% of that back out via refi without having to pay the cap gain?

[Dave Foster]

@Chase Shank, The answer is No and maybe and yes.

1. Property purchased primarily for resale (a flip) is not eligible 1031 treatment.  Your intent when purchasing the property must have been to hold for productive use in business trade or investment.  So - No.

2. In order to defer all tax you must purchase at least as much as you sell and you must use all of the proceeds in the next purchase.  So if you had purchased that property with then intent of holding for productive use.  And if it's net sales price was 130K and if your net proceeds were 40K then you could do a 1031 that would fully defer all tax. So - maybe.

3. You do not want to refinance before you sell.  But you may sell and then 1031 and after completing the 1031 refinance in anyway you want.  So - yes.