Can I cash out and avoid taxes by using a 1031, then having the seller carry back a second?

[Jamie Beckland]

I am looking at selling a property, and 1031ing into a new property.

The seller is willing to carry a second mortgage.

I plan to close the purchase transaction using the cash from the 1031.

After that transaction closes, what happens if I then sign a second with the seller, and he gives the cash right back to me?

Would that cash be taxable? Or did I just take on additional tax deductible debt, and end up with the non-taxable proceeds from my original property?

[Ryan Thomas]

Here is a good article by that relates to this subject.

http://www.biggerpockets.com/renewsblog/2014/08/21/strategy-take-cash-1031-exchange-tax-free/

 In most circumstances, an attorney or CPA will recommend refinancing the replacement property after completing the exchange transaction. Any refinancing should be done later and off the replacement property closing statement.

For your situation, I would get the opinion of your CPA, because this is a little bit different than a regular refi and not sure what would happen in case of an audit.