Posted by John on March 19, 2006 at 03:21:05:
I am not a CPA nor is this to be confused with being an expert.
Pulling cash out with a refinance does not effect the cost basis in a property. If you buy a property for a 100k and sell for 300k your taxable gain is 200K, less costs. It does not mater what is owed on the property. Seek advise of your CPA.
Tax Question relating to refinance - Posted by Fred
Posted by Fred on March 18, 2006 at 21:21:05:
I am confused how refinancing the property affects the adjusted basis. For example:
Adjusted basis-100,000
Adjusted Sales Price-300,000
Realized Tax Gain-200,000
Now say I took cash out of the property in the amount 50,000. Is my realized gain $150,000 instead of 200K?
Re: Tax Question relating to refinance - Posted by Rich
Posted by Rich on March 21, 2006 at 16:25:42:
I am not a CPA but have just read this from the Bob Bruss (he’s an attorney) newsletter. Basis is used for calculating how much capital gains tax you owe. Your basis only changes if:
(1) You die - then the basis becomes the current fair market value for the heirs (there are some exceptions depending on how title is held),
(2) You make capital improvements, such as additions and so on,
(3) You sell, then the purchase price is the new basis for the buyer.
Re: Tax Question relating to refinance - Posted by Peter_MD
Posted by Peter_MD on March 21, 2006 at 12:18:29:
Fred:
Getting cash out of a property before there is a sale is just the same as getting a cash advance from your employer before payday.
At payday, you will still get the same paystub, however, the advance will be withheld and repaid back to your employer and you will get the net pay reduced by the cash advance.
Suggest you consult with a CPA in your area and get professional tax advice. You can get a referral from your local real estate investing club in your area.
Remember, a penny saved … is definitely earned … and keeps you from overpaying on your taxes, lets you definitely sleep well at night, and helps you grow available funds to do more real estate investing deals.
The best to you … don’t go there alone … get a good “team” together with real estate professionals including a good real estate attorney and a CPA.
Re: Tax Question relating to refinance - Posted by William L. Exeter
Posted by William L. Exeter on March 19, 2006 at 17:00:21:
Refinancing your property does not change your basis or adjusted basis. The $50K that you pull out via a refinance now means that you owe $50K in more debt, but you still have the same cost basis and the same gain (it is not realized until you sell the property).
Bill Exeter