Avoid Capital Gains by Paying off another Mortgage?

[Kevin Ludwig]

Hello All!     Haven't found this answer. If I am selling an investment property (1 year primary, 6 month months rental investment), and take the $76,000 gain to pay down another rental investment property's mortgage in Colorado, does this avoid capital gains tax? Any help is greatly appreciated!

[Bob Willis]

No - there is no way to avoid the tax with the scenario you describe. If you want to move back into the property for another year (thus making it your residence in two of the past five years, you can avoid the tax on the gain).The only way to defer the payment of taxes on the gain is a 1031 exchange. Unfortunately you will need to purchase another property to leverage the 1031. Your existing property does not qualify. This is not my area of expertise but I believe what I say to be accurate.