Cash out refinance, then sell

[Eric Wallet]

Question? Would it be beneficial or possible to execute the following:

Have an investment property with lots of equity. Say I own this property (other than my primary) which I owe $50k on the mortgage, and this property is appraised at $200k. If sold for that price, it would be taxed for income of $150k. Instead would it be possible to cash out refinance this property for $160k (80% of appraisal) minus the mortage amount owed of $50k, and have $110k as a cash out amount. Then turn around and sell in 6 months for $200k minus the $160k mortgage owed and only pay tax on the $40k? f

Thanks for advice.

[Jonathan Kretschmer]

Someone please correct me if I'm wrong, but...

Whether the property has one, two, or ten liens does not affect whether there is a gain or loss when the property is sold. 

And it's the gain or loss when you sell that determines tax liability.

Gain or loss is (generally) determined by subtracting your cost basis (what you paid for the home) by the sale price (what you receive for selling the home). Since this is an investment property you can not use the 2 years out of the past 5 capital gains exemption for principal residences.

It sounds like paying a CPA might be worth your while.