Refinancing 1031 Exchange Property

1031 EXCHANGE HANDBOOK ...

EXCHANGES OF A MORE ADVANCED NATURE

Refinancing the 1031 Property

There is a risk to refinancing the property to be sold because the IRS has ruled that cash proceeds refinanced immediately prior to closing in the exchange constitutes taxable boot.  The rule of thumb in refinancing before the exchange is:  don’t.  You can refinance the new purchased property immediately after the exchange is completed.