Will I Have To Pay Taxes When.........??
hi recently purchased a house for 27 thousand cash. im looking to refinance and pull out about 50 thousand. so the money given to me will be a loan.
if i choose to sell that property say in the next year or two will i be required to pay taxes on that 50 thousand? this is my first time to refinance and pull equity out so your help will be greatly appreciated thanks
Justin :-D
oh just an additional note. i will also be pulling out my origional 27 thousand along with the 50 thousand. just to keep that straight and reduce confusion. i know i wont have to pay tax on the origional 27 but the 50 thousand additional is what im asking about
Whether you take your profits now by cashing out or when you sell, you will be taxed for any gains above purchase price.
if thats the case then the only benefit really to taking cash out now would be to reinvest it into something else. such as another investment property?
any thoughts?
thanks for your help
Justin
if you plan to hold the property, if you are going to sell do a 1031 exchange
yeah i planned to do that. and thats a good point. thank you. i would like to pull the cash out and then do a rent to own and later sell using the 1031 exchange on this one
hey thanks guys
any other comments are appreciated
Justin
You are venturing into dealer activities here. Dealer dispositions are not eligible to participate in 1031 exchanges.
Discuss your strategy thoroughly with your professional tax advisor. Otherwise, your strategy could have unexpected tax consequences.
so your suggesting that by me simply selling one home i might qualify as a dealer and suffer extended penalties?
what exactly has to take place in order for the IRS to label me as a dealer?
this is my first sale as of 2004. i dont plan to do alot of selling this year.
again guys i appreciate the help very much. if you could elaborate on this i would greatly appreciate this.
thanks again
Justin
My caution is prompted by your statement of intent:"i would like to pull the cash out and then do a rent to own and later sell using the 1031 exchange on this one" Purchasing a property with the intent to sell (even on a rent to own) is property flipping. Property flipping is a dealer activity. Dealer activities are not eligible to participate in a 1031 exchange.
Yes, even if you only do one transaction, your transaction is a dealer disposition if it fits the pattern I just described.
I don't know what "extended penalties" you are referring to. I am not aware of any "extended penalties" that would accrue to you if you take the correct tax treatment for your dealer dispositions.
[ Edited by DaveT on Date 03/31/2004 ]
what doesnt qualify as dealer flipping then? what length of time do i need to hold the property? what do i have to do to avoid the label of a "dealer"?
thanks for the help with this i appreciate the help on this
Justin