Cash out refi affect future capital gains?

[David Wild]

When doing a cash out refi to buy more properties, how does that affect a future sale of the property that had cash pulled out? I’ve read about it being done to close to each other and I know that’s a no go. But if I do a cash out refi and then sell the property that had cash pulled out, say 2 or 3 years later what happens. If I can prove that I used the funds to buy more property would I have to pay capital gains?

[Tony Hightower]

Quote from @David Wild:

I understand if it went up in value again and I sold I could use those proceeds in a 1031. But if the basis is 100k and I refi to 200k, then  sold 5 years later for let’s say 200k. I would owe tax on 100k even though that money was reinvested into another property and I wouldn’t actually be pocketing any cash? 

If you sold, then you would be paying taxes on the gain of 100k. If you 1031, you would need to 1031 into at least a 200k property to defer all gains. Which means in 5 years you would need to pull 100k out of pocket for that exchange. 

You could also do a partial exchange. Pay tax on some of the gain based on your personal tax situation. Or create more passive losses, to offset the gain. 

NOT REAL ADVICE, NOT A CPA, TALK TO A GOOD ONE.