Using mortgage on principal residence to buy investment property
Dear Mr. Hickox: I purchased a one acre parcel of raw land two years ago for $72K. I bought this land using the equity from my primary residence so I now own the land free & clear but it increased my mortgage by $75K (including $3K for closing costs). I bought the land with the intent of building a home on it eventually. However my wife & I no longer wish to do this. If I were to sell the land for $125 & put all of that into my current mortgage would I still need to pay capital gains taxes on the profit of that sale?? In other words, does it make a difference to the IRS that I used my primary residence to get the raw land in the first place? Or, must I continue to buy other investment type property & never be able to put that money back into my mortgage? Thank You
Dear B: Your only option for not paying taxes on this sale is through a 1031x. In order to pay no taxes you must trade equal or up in VALUE. If you really want to pay down the mortgage on your home (NOT a good idea in my opinion) you will have to pay tax on the gain ($125K-$75K= $50K gain). This would be taxed at 15% federal and 5% State of Colorado. Total estimated tax without a 1031x= $10K. I hope you will choose us for your 1031x services.
Steve Hickox
Attorney / President
1031x.com has grown to provide many services to our clients as Castle United!
Click here: http://www.CastleUnited.com/
1031x.com, Inc.
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012
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