Posted by William L. Exeter on March 20, 2006 at 14:24:11:
Yes, that can be a work around. The key thing for inveestors to keep in mind is the INTENT to HOLD for investment by REINVESTING the entire value of the relinquished property.
The question is when can you refinance and pull cash out without triggering any risk as to capital gains?
There is a Private Letter Ruling issued by the IRS where the gentleman had refinanced the week after closing on his replacement property and the IRS did not disallow the transaction. This is not a slam dunk however. The PLR was requested for another issue and the refinance just happened to be part of the request, so it was not the key issue involved, but it was not disallowed either.
I would recommend that an investor complete his or her exchange and wait at least 2 or 3 months before refiancing unless absolutely necessary. You should always error on the side of conservatism unless you do not have any other choice.