Posted by JohnBoy on July 19, 2001 at 11:06:23:
I’m not an accoutant, but my guess is that he wouldn’t be taxed on any money he borrowed against the property. If he sells it on terms after refinancing I don’t think that would create a tax due on the money borrowed just because he sold the property. His tax would be based on the sale amount of the property, period! If he sold on terms his tax would be due as he receives the payments instead of being taxed on the full amount at the time of the sale.
If you sold a property on terms and later went back and refinanced to pull some cash out, would that mean you have to pay taxes on the money you financed? I don’t think so. So why would it be any different if you borrowed against the property before you sold?