Legal Or Tax Evasion ?
Hello,
An individual I know said that if you had a residence that you paid $100k for and it was worth say $150k, you could take out a loan for the difference, sell the place for what it was worth to satisfy the $50k loan, and walk away with the loan untaxed. Sounds Illegal to me. Can someone clarify this for me ? Am I right or wrong ?
Thanks
You pay taxes on the profit from the sale. If you buy for 100k, sell for 150k, you pay taxes on 50k. If you want to refinance it in the meantime, for some unknown reason, that's not relevant, given the scenario you described. Why would you want to refinance something that you're just going to sell??
You are taxed based on what you have purchased the property for, not the mortgage balance (in a nutshell). If you refinance the property and sell for what you owe, you will still have to pay capital gains tax but you won't have the money from the sale of the property to pay for it.
Thanks for the replys !
This site is GREAT !
It helps me to weed out the chaf of people who try to give me REI advice & who I will or will NOT listen to.
Thanks again
If it is your own home and you have lived there the requisite amount of time you will pay "no" tax at all
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