Posted by Tim Jensen on February 19, 2001 at 22:15:05:
Jim,
You and I are on the same side of an issue. I can not remember that last time we agreed on anything.
Now seriously, I had a feeling that he was mistaken. If that was the case I am sure evryone would be doing it. The guy told me the reason that the Gov. does this is because they figure if you pull out the money, you must be putting it back into the economy. That is why I questioned it, his reason made no sense, even for the government.
Posted by Tim Jensen on February 19, 2001 at 19:57:18:
I was talking to a mortgage broker today and he was telling me that he buys homes for cahs then refis them then sells them and does not pay much in the way of capitial gains.
This how he does it:
He buys a house for 20k then put 5k in repairs into it. Then the place is worth 50k. He goes out and get a loan for 80-85% of value, that is 40k. Then he sells on a land contract for 50k. Then after a year, he gets the people to cash him out. He gets 40k to pay off his loan then takes back a second for 10k. He told me that because he has refied the place for 40k, he does not pay any capital gains. He says that the IRS looks at what he refied for not what he paid in determining tax liability. Is this true?
I was always under the impression that you pay capital gains on the difference between your purchase price and the sale price.
Posted by JPiper on February 19, 2001 at 20:40:09:
Tim:
This guy is completely wrong. You’re right. Hope this guy is saving some money up…because he’s going to have some big penalties to pay one day when he gets audited.
